Executive Orders 12866 and 13771, and Regulatory Flexibility Act

This rulemaking does not meet the definition of a significant regulatory action contained in section 3(f) of Executive Order 12866 and is not subject to review by the Office of Management and Budget (OMB). Additionally, because this rule does not meet the definition of a significant regulatory action it does not trigger the requirements contained in Executive Order 13771. See OMB's Memorandum titled “Interim Guidance Implementing Section 2 of the Executive Order of January 30, 2017, titled `Reducing Regulation and Controlling Regulatory Costs'” (February 2, 2017).

Pursuant to the requirements set forth in the Regulatory Flexibility Act (RFA) [5 U.S.C. 601 et seq. ], the Administrator of AMS has considered the economic effect of this action on small entities and has determined that this proposed rule does not have a significant economic impact on a substantial number of small business entities. The purpose of RFA is to fit regulatory actions to the scale of businesses subject to such actions in order that small businesses will not be unduly burdened.

AMS has determined that this proposed rule will not have a significant impact on a substantial number of small entities, as defined by RFA, because the user-fee services are not subject to scalability based on the business size.

Currently, approximately 235 applicants subscribe to AMS's voluntary, fee-for-services that are subject to the requirements of this regulation. The U.S. Small Business Administration's Table of Small Business Size Standards matched to the North American Industry Classification System (NAICS) Codes identifies small business size by average annual receipts or by the average number of employees at a firm. This information can be found at 13 CFR parts 121.104, 121.106, and 121.201.

AMS requires that all applicants for service provide information about their company for the purpose of processing bills. Information collected from an applicant includes company name, address, billing address, and similar information. AMS does not collect information about the size of the business. However, based on working knowledge of these operations, AMS estimates that roughly 72 percent of current applicants may be classified as small entities. It is not anticipated that this action would impose additional costs to applicants, regardless of size. Current applicants will not be required to provide any additional information to receive service. The effects of this proposed rule are not expected to be disproportionately greater or lesser for small applicants than for large applicants.

AMS is committed to complying with the E-Government Act of 2002 to promote the use of the internet and other information technologies to provide increased opportunities for citizen access to government information and services, and for other purposes. Accordingly, AMS developed options for companies requesting service to do so electronically.

The USDA has not identified any relevant Federal rules that duplicate, overlap, or conflict with this proposed rule.

This action has been reviewed in accordance with the requirements of Executive Order 13175, Consultation and Coordination with Indian Tribal Governments. The review reveals that this regulation would not have substantial and direct effects on Tribal governments and would not have significant Tribal implications.

This proposed rule has been reviewed under Executive Order 12988, Civil Justice Reform. This proposed rule is not intended to have retroactive effect. The Act prohibits states or political subdivisions of a state to impose any requirement that is in addition to, or inconsistent with, any requirement of the Act. There are no civil justice implications associated with this proposed rule.

In accordance with the Paperwork Reduction Act of 1995 [44 U.S.C. Chapter 35], this proposed rule would not change the information collection and recordkeeping requirements previously approved and would not impose additional reporting or recordkeeping burden on users of these voluntary services.

The information collection and recordkeeping requirements of this part have been approved by OMB under 44 U.S.C. Chapter 35 and have been assigned OMB Control Number 0581-0128.

In September 2014, three separate OMB collections—OMB 0581-0127, OMB 0581-0124, and OMB 0581-0128—were merged, such that the current OMB 0581-0128 pertains to Regulations for Voluntary Grading, Certification, and Standards and includes 7 CFR parts 54, 56, 62, and 70.

The Agricultural Marketing Act of 1946 (7 U.S.C. 1621 et seq. ), herein after referred to as the “Act,” directs and authorizes the Secretary of Agriculture to facilitate the competitive and efficient marketing of agricultural products. AMS programs support a strategic marketing perspective that adapts product and marketing decisions to consumer demands, changes domestic and international marketing practices, and incorporates emerging technology. AMS provides impartial grading and certification services that ensure agricultural products meet specified requirements. These services are voluntary, with users paying for the cost of the requested service. AMS grading services verify that product meets USDA grade standards ( e.g., USDA Choice) and certify that products meet requirements defined by the company or another third-party. Product characteristics such as manner of cut, color, and other quality attributes can be directly examined by an AMS employee or an authorized agent to determine if product requirements have been met. The product can be identified as “USDA Prime,” “USDA Choice,” “USDA Select,” “USDA Certified,” “USDA Accepted as Specified,” or “USDA Further Processing Certification Program.”

In 2012, an organizational merger within AMS combined the Livestock and Seed Program and Poultry Programs into the Livestock, Poultry, and Seed (LPS) Program. Subsequently, the LPS Program created the Quality Assessment Division (QAD) to oversee services carried out by the Audit Services Branch, Grading Services Branch, Standardization Branch, and the Business Operations Branch. The Grading Services Branch administers grading and certification services that were performed by the former Meat Grading and Certification Branch of the former Livestock and Seed Program and the former Grading Branch of Poultry Programs. In 2018, another organizational change caused the LPS Program to be renamed the Livestock and Poultry (LP) Program.

Meat grading and certification activities are carried out under 7 CFR 54, while poultry and shell egg grading and certification activities are carried out under 7 CFR 70 and 7 CFR 56, respectively.

AMS proposes to update a number of administrative and organizational references to reflect the current terminology and structure of AMS. These amendments would include amending § 54.1 to change the LPS Program to the Livestock and Poultry Program. Certain terms and definitions would be added to, updated in, or deleted from § 54.1 to reflect the current organizational structure within the Agency. The term and definition for Livestock would be removed from the regulation because the use of this definition was fundamentally the same as the definition of Animals. The term and definitions for Contract Verification Service would be removed from § 54.1 because this service is no longer provided, a conforming change would be made to § 54.4 Kind of Service. The definition for Animals would be revised to add “bison,” as the Agency certifies bison; Chief would be revised to identify the Grading Services Branch Chief; Division would be revised to identify QAD and appropriately reflect its level within the organization; Meat by-products would be revised to exclude brain derived from ruminant animals, which is no longer allowed per food safety regulations; and the term Standards would be replaced with Official Standards and its definition would be revised for consistency within the regulation. The terms Yield Grade and Appeal Service and their respective definitions would be added to identify the different types of grading service offered under the regulations. The terms Program and Deputy Administrator and their respective definitions would be added to appropriately recognize the office and leadership within the current organizational structure of the Agency.

Since this regulation has not received significant revisions for some time, AMS proposes to bring it into compliance with The Plain Writing Act of 2010, which requires all Federal agencies to write clear Government communication that the public can understand and use. To accomplish this, AMS is focusing on appropriate pronoun use, omitting unnecessary words, and writing short sentences.

To reflect organizational changes and for consistency with other changes to this regulation, AMS proposes to amend § 54.4 Kind of Service, § 54.6 How to Obtain Service, § 54.7 Order of Furnishing Service, § 54.8 When Request for Service Deemed Made, § 54.9 Withdrawal of Application or Request for Service, and § 54.10 Authority of Agent.

AMS also proposes to amend § 54.5 Availability of Service by removing language that states service will be provided without discrimination, as this is a duplicative statement of a requirement that is mandated through Departmental regulations, not by AMS. AMS proposes to amend § 54.6 How to obtain service by increasing the length of time between cancellation of commitment service and reapplication for commitment service from 1 to 2 years, and the applicant is responsible for reimbursing relocation costs incurred by the Agency to transfer the grader.

AMS proposes to remove the reference to the Medium grade for lamb, yearling lamb, mutton, and pork carcasses in § 54.11 (a)(1)(vii). The official standards for grades of lamb and mutton carcasses were amended in October 1940 (Amendment No. 1 to S.R.A. 123) to change the grade designations Medium and Common to Commercial and Utility, respectively. In April 1968, the official standards for pork carcasses were revised and the former Medium and Cull grades were combined and renamed U.S. Utility. Removing the reference to Medium in § 54.11 (a)(1)(vii) aligns the regulatory language with the language contained within the official standards.

AMS proposes to create a stair-stepped approach regarding denial or withdrawal of Grading Branch services. As written, § 54.11 requires AMS to go before an administrative law judge to hear a case for an applicant accused of misconduct before any action can be taken; the process and actions currently identified in this part limit AMS's ability to effectively manage its services, including denying, withdrawing, or suspending services in a timely manner when warranted for reasons of misconduct. Therefore, AMS is clarifying that it relies first on the Supplemental Rules of Practice in 7 CFR 50 and then, if necessary, uses the Rules of Practice Governing Formal Adjudicatory Proceedings Instituted by the Secretary Under Various Statues set forth in 7 CFR 1.130 through 1.151 when denying, withdrawing, or suspending services to applicants. An applicant would still have an opportunity for a hearing before an administrative law judge before any permanent action occurs.

The regulations outlined in this part are intended to describe to the public how AMS provides grading and certification services and the related processes, not provide instruction to employees or repeat requirements covered by another Federal regulation. In this vein, AMS proposes to remove and reserve for future use § 54.12 Financial interest of official grader. USDA graders and other employees are required to meet and maintain Departmental ethics requirements; therefore, AMS has determined that it is unnecessary to maintain this administrative item in this regulation. AMS also proposes to remove and reserve § 54.14 Official certificates, which removes the Agricultural Products Certificate Form LS-5-3 and the Applicant Charges Certificate Form LS-5-5 that were discontinued in 2009; instead, the information contained on these forms is entered into a database. If applicants require an official certificate from USDA, an official memorandum is issued containing the pertinent information.

In 2001, vision-based instrument technology was approved for use in the official determination of the size of the ribeye area. In 2007, it was approved for yield grade determination, and in 2009, it was approved for marbling assessment. Although this technology has been used as an aid in the application of official USDA beef grades in since 2001, the current regulations make no mention of it. AMS considers the use of instrument technology to be an important option for determining degrees of marbling in meat carcasses and yield and, therefore, is adding a reference to it in § 54.15.

AMS proposes to appropriately identify and reference figures within § 54.17. Currently, multiple figures in that section contain the same reference, Figure 1, which makes it difficult to appropriately reference a particular figure. AMS proposes to remove the Carcass Data Service orange ear tag from § 54.17, because the Agency no longer prints or maintains them and instead allows cattle enrolled in the Carcass Data Service to be identified through other approved methods. AMS proposes to appropriately identify and reference in § 54.17 the USDA Further Processing Certification Program shield used to identify product produced under the USDA Further Processing Certification Program. Additionally, AMS proposes to amend language within this section to accurately identify the USDA Hold tag that is now used in place of the USDA Product Control tag; the tag is now “red” in color as opposed to “orange.”

With § 54.19, AMS proposes to remove the heading APPEAL SERVICE, rename § 54.19 as Appeal of a grading service decision, reassign amended language from §§ 54.20 through 54.26 under § 54.19 (a) through (h), and subsequently reserve §§ 54.21 through 54.26.

AMS proposes to rename § 54.20, Exemptions. The proposed amendments would identify the requirements within the regulation where exemptions are most commonly provided and identify an option for exemptions as seen fit by the Director. It also would require the Director to approve all exemptions to this regulation. In doing so, AMS proposes to amend language pertaining to grading exemptions from §§ 54.4, Kind of service, 54.5 Availability of service, and 54.13, Accessibility and refrigeration of products; access to establishments.

AMS proposes to remove and reserve § 54.30 Errors in service. AMS proposes that § 54.30 is most appropriately covered under a policy or procedure rather than a regulation; therefore, AMS proposes that it is unnecessary to maintain this administrative item in this regulation.

Lastly, AMS proposes to replace the title and language of § 54.31 Uniforms with the title OMB Control Number. AMS believes the subject of uniforms is more appropriate under a policy rather than a regulation. AMS proposes to add language under this section that clearly identifies the OMB control number, OMB 0581-0128, assigned to this regulation in accordance with the Paperwork Reduction Act.

For the reasons set forth in the preamble, AMS proposes to amend 7 CFR 54 as follows:

The additions and revisions read as follows:

On January 10, 2018, the Appliance Standards and Rulemaking Federal Advisory Committee (ASRAC) met and passed the recommendation to form a VRF multi-split systems working group to meet and discuss and, if possible, reach a consensus on proposed Federal test procedures and standards for VRF multi-split systems. On April 11, 2018, DOE published a notification of intent to establish a working group for VRF multi-split systems to negotiate a notice of proposed rulemaking for test procedures and energy conservations standards. That notification also solicited nominations for membership to the working group. (83 FR 15514) This notification announces the next round of meetings for this working group.

DOE will host a public meeting and webinar on Thursday, February 21, 2019 from 9:00 a.m. to 5:00 p.m. and on Friday, February 22, 2019 from 9:00 a.m. to 1:00 p.m. in Washington, DC.

The purpose of these meetings will be to negotiate in an attempt to reach consensus on proposed Federal test procedures and energy conservation standards for VRF multi-split systems.

The time, date, and location of the public meeting are listed in the DATES and ADDRESSES sections of this document. If you plan to attend the public meeting, please notify the ASRAC staff at asrac@ee.doe.gov.

Due to the REAL ID Act implemented by the Department of Homeland Security (DHS), there have been recent changes regarding ID requirements for individuals wishing to enter Federal buildings from specific States and U.S. territories. DHS maintains an updated website identifying the State and territory driver's licenses that currently are acceptable for entry into DOE facilities at https://www.dhs.gov/real-id-enforcement-brief. A driver's license from a State or territory identified as not compliant by DHS will not be accepted for building entry, and one of the alternate forms of ID listed below will be required. Acceptable alternate forms of Photo-ID include U.S. Passport or Passport Card; an Enhanced Driver's License or Enhanced ID-Card issued by States and territories as identified on the DHS website (Enhanced licenses issued by these States and territories are clearly marked Enhanced or Enhanced Driver's License); a military ID or other Federal government-issued Photo-ID card.

In addition, you can attend the public meeting via webinar. Webinar registration information, participant instructions, and information about the capabilities available to webinar participants will be published on DOE's website: https://energy.gov/eere/buildings/appliance-standards-and-rulemaking-federal-advisory-committee. Participants are responsible for ensuring their systems are compatible with the webinar software.

Any person who has plans to present a prepared general statement may request that copies of his or her statement be made available at the public meeting. Such persons may submit requests, along with an advance electronic copy of their statement in PDF (preferred), Microsoft Word or Excel, WordPerfect, or text (ASCII) file format, to the appropriate address shown in the FOR FURTHER INFORMATION CONTACT section of this notification. The request and advance copy of statements must be received at least one week before the public meeting and may be emailed, hand-delivered, or sent by postal mail. DOE prefers to receive requests and advance copies via email. Please include a telephone number to enable DOE staff to make a follow-up contact, if needed.

ASRAC's Designated Federal Officer will preside at the public meeting and may also use a professional facilitator to aid discussion. The meeting will not be a judicial or evidentiary-type public hearing, but DOE will conduct it in accordance with section 336 of EPCA (42 U.S.C. 6306). A court reporter will be present to record the proceedings and prepare a transcript. A transcript of the public meeting will be included on DOE's website: https://energy.gov/eere/buildings/appliance-standards-and-rulemaking-federal-advisory-committee. In addition, any person may buy a copy of the transcript from the transcribing reporter. Public comment and statements will be allowed prior to the close of the meeting.

The docket is available for review at https://www.regulations.gov/docket?D=EERE-2018-BT-STD-0003, including Federal Register notices, public meeting attendee lists and transcripts, comments, and other supporting documents/materials. All documents in the docket are listed in the https://regulations.gov index. However, not all documents listed in the index may be publically available, such as information that is exempt from public disclosure.

The policy objectives of the proposed rule are twofold. The first is to simplify the FDIC's regulations by removing unnecessary regulations, or realigning existing regulations in order to improve the public's understanding and to improve the ease of reference. The second is to promote parity between State savings associations and State nonmember banks by making both classes of institutions subject to the same requirements regarding real estate lending standards. Thus, as further detailed in this SUPPLEMENTARY INFORMATION Section, the FDIC proposes to rescind and remove from the CFR rules entitled “Lending and Investment” (part 390, subpart P) that were transferred to the FDIC from OTS in connection with the implementation of Title III the Dodd-Frank Act. The FDIC takes the view that other existing regulations that concern permissible activities, safety and soundness standards, and real estate lending standards replicate the current requirements in part 390, subpart P. In addition, the proposal would amend certain sections of part 365 of the FDIC's existing regulations on real estate lending standards to make it clear that part 365, subpart A, applies to all insured depository institutions for which the FDIC is the appropriate Federal banking agency. Not only would this approach simplify the FDIC's regulations by removing unnecessary provisions, but it would have the added benefit of creating parity between state savings associations and state nonmenber banks by ensuring that both classes of institutions are subject to the same requirements regarding safety and soundness and real estate lending standards. Finally, the FDIC proposes to amend part 365 by rescinding in its entirety subpart B concerning registration requirements for residential mortgage loan originators because supervision and rulemaking authority in this area was transferred to the Bureau by the Dodd-Frank Act and the Bureau has issued its own regulation, Regulation G.

The Dodd-Frank Act, signed into law on July 21, 2010, provided for a substantial reorganization of the regulation of State and Federal savings associations and their holding companies. 1 Beginning July 21, 2011, the transfer date established by section 311 of the Dodd-Frank Act, 2 the powers, duties, and functions formerly performed by the OTS were divided among the FDIC, as to State savings associations, the Office of the Comptroller of the Currency (OCC), as to Federal savings associations, and the Board of Governors of the Federal Reserve System (FRB), as to savings and loan holding companies. Section 316(b) of the Dodd-Frank Act  3 provides the manner of treatment for all orders, resolutions, determinations, regulations, and other advisory materials that have been issued, made, prescribed, or allowed to become effective by the OTS. The section provides that if such materials were in effect on the day before the transfer date, they continue in effect and are enforceable by or against the appropriate successor agency until they are modified, terminated, set aside, or superseded in accordance with applicable law by such successor agency, by any court of competent jurisdiction, or by operation of law.

Pursuant to section 316(c) of the Dodd-Frank Act, 4 on June 14, 2011, the FDIC's Board of Directors approved a “List of OTS Regulations to be Enforced by the OCC and the FDIC Pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act.” This list was published by the FDIC and the OCC as a Joint Notice in the Federal Register on July 6, 2011. 5

Although section 312(b)(2)(B)(i)(II) of the Dodd-Frank Act, 6 granted the OCC rulemaking authority relating to both State and Federal savings associations, nothing in the Dodd-Frank Act affected the FDIC's existing authority to issue regulations under the Federal Deposit Insurance Act (FDI Act)  7 and other laws as the “appropriate Federal banking agency” or under similar statutory terminology. Section 312(c)(1) of the Dodd-Frank Act  8 revised the definition of “appropriate Federal banking agency” contained in section 3(q) of the FDI Act, 9 to add State savings associations to the list of entities for which the FDIC is designated as the “appropriate Federal banking agency.” As a result, when the FDIC acts as the designated “appropriate Federal banking agency” (or under similar terminology) for State savings associations, as it does here, the FDIC is authorized to issue, modify, and rescind regulations involving such associations, as well as for State nonmember banks and insured branches of foreign banks.

As noted above, on June 14, 2011, operating pursuant to this authority, the FDIC's Board of Directors (Board) issued a list of regulations of the former OTS that the FDIC would enforce with respect to State savings associations. Also on June 14, 2011, the FDIC's Board reissued and redesignated certain regulations transferred from the former OTS. These transferred OTS regulations were published as new FDIC regulations in the Federal Register on August 5, 2011. 10 When the FDIC republished the transferred OTS regulations as new FDIC regulations, it specifically noted that its staff would evaluate the transferred OTS rules and might later recommend incorporating the transferred OTS regulations into other FDIC regulations, amending them, or rescinding them, as appropriate. 11

A subset of the regulations transferred to the FDIC from the OTS concern lending and investment provisions applicable to State savings associations. The OTS regulations, formerly found at 12 CFR part 560, sections 560.1, 560.3, 560.100, 560.101, 560.120, 560.121, 560.130, 560.160, 560.170, and 560.172, were transferred to the FDIC with only nomenclature changes and now comprise part 390, subpart P. Each provision of part 390, subpart P is discussed in Part III of this SUPPLEMENTARY INFORMATION section, below.

The FDIC has conducted a careful review and comparison of part 390, subpart P and other FDIC regulations concerning permissible activities for State savings associations (12 CFR part 362, subpart C (part 362, subpart C)), activities implicating safety and soundness (12 CFR part 364 (part 364 and its appendix A)), and activities implicating real estate lending standards (part 365, subpart A and its appendix A). As discussed in Part III of this SUPPLEMENTARY INFORMATION section, the FDIC proposes to rescind part 390, subpart P because the FDIC considers the provisions contained in part 390, subpart P to be unnecessary because of the applicability of other FDIC regulations.

The FDIC proposes to further effectuate the transfer of supervisory authority for State savings associations from the former OTS to the FDIC by amending certain parts of part 365 of the FDIC's regulations to clarify that part 365, subpart A applies to all insured depository institutions, including State savings associations, for which the FDIC is the appropriate Federal banking agency. As discussed in Part IV of this SUPPLEMENTARY INFORMATION section, the FDIC proposes to amend part 365, subpart A in order to make part 365, subpart A applicable to all insured depository institutions, including State savings associations, for which the FDIC is the appropriate Federal banking agency.

Simultaneously, the FDIC proposes to take the opportunity to rescind, in its entirety, subpart B of part 365, which relates to registration requirements for residential mortgage loan originators, due to the Bureau's issuance of its  12 regulation, Regulation G, pursuant to the Bureau's authority under the Dodd-Frank Act. 13 As discussed in Part V of this SUPPLEMENTARY INFORMATION section, the FDIC considers the provisions contained in part 365, subpart B to be unnecessary, redundant, or otherwise duplicative of the Bureau regulation governing this area.

Part 362 of the FDIC's regulations governs the activities and investments in which insured State banks and insured State savings associations may engage as principals. Subpart C of part 362 implements section 28 of the FDI Act. 14 Subpart C specifically addresses insured State savings associations and restricts their activities and investments to those permissible for a Federal savings association under any statute, including the Home Owners' Loan Act  15 (HOLA), and to those recognized as permissible for a Federal savings association by the OCC (or former OTS) or in bulletins, orders, or written interpretations of either the OCC or former OTS. 16 The FDIC has indicated that it will allow State savings associations and their service corporations to “undertake only safe and sound activities and investments that do not present significant risks to the Deposit Insurance Fund and that are consistent with the purposes of Federal deposit insurance and other applicable law.”  17

As part of a regulatory reorganization and modernization initiative, section 560.120 was promulgated by the OTS in 1996. At that time, the OTS incorporated the substance of former section 545.48 (authorizing Federal savings associations to issue letters of credit) into new section 560.120 that applied to both Federal and State savings associations. 18 Section 560.120 was designed to provide uniform authority, standards and restrictions for all savings associations to consider before issuing a letter of credit or entering into another independent undertaking that had been recognized in law or approved by the OTS. 19 The former OTS rule largely mirrored the approach taken by the OCC for national banks, which incorporated market standards and international conventions applicable to letters of credit. 20

Section 560.120 was transferred to the FDIC and redesignated as section 390.267 to cover letters of credit and other independent undertakings to pay against documents issued by or entered into by State savings associations, and it was also transferred to the OCC and redesignated as section 160.120 to cover Federal savings associations that issue letters of credit and enter into other independent undertakings. 21

Sections 390.267 and 160.120 provide that subject to safety and soundness considerations, “a [State/Federal] savings association may issue and commit to issue letters of credit within the scope of applicable laws or rules of practice recognized by law. It may also issue other independent undertakings within the scope of such laws or rules of practice recognized by law, that have been approved by the [FDIC/OCC] (approved undertaking).”  22

As noted above in Part III.A.1 of this SUPPLEMENTARY INFORMATION section, part 362, subpart C of the FDIC's regulations prohibits insured State savings associations and their service corporations from engaging in activities and investments of a type that are not permissible for a Federal savings association and their service corporations.

Under subpart C of part 362, the phrase “activities and investments of a type that are not permissible for a Federal savings association” generally means any activity not authorized expressly by HOLA and activities not recognized as permissible by OCC regulation or other written supervisory directive from the OCC or from the OTS to the extent not modified, terminated, set aside, or superseded by the OCC. 23 Federal savings associations are permitted to issue letters of credit and may issue other independent undertakings pursuant to 12 CFR 160.50, as transferred by the OCC from the OTS, subject to standards and restrictions found in 12 CFR 160.120, discussed above.

Because 12 CFR 362.9 allows State savings associations to exercise the power permitted to Federal savings associations by 12 CFR 160.50 and must follow State law, the standards and restrictions applicable to Federal savings associations that issue letters of credit and engage in other independent undertakings set forth in 12 CFR 160.120, and considerations of safety and soundness, the FDIC considers section 390.267 to be unnecessary and proposes that it be rescinded.

Section 390.268 of part 390, subpart P, formerly designated as OTS section 560.121, applies to all savings associations and addresses investments in or loans to State housing corporations.

Under subpart C of part 362, State savings associations generally are permitted to invest in State housing corporations because Federal savings associations are expressly authorized to invest in State housing corporations pursuant to section 5(c)(1)(P) of HOLA. 24 Because such investments are expressly permissible for Federal savings associations to make under HOLA, State savings associations may rely on part 362 in making such investments consistent with State law and in a safe and sound manner. As such, the FDIC considers section 390.268 to be unnecessary and proposes that it be rescinded.

The FDIC's standards for safety and soundness were promulgated in the mid-1990s jointly by the FDIC, along with the FRB, the OCC, and the OTS (collectively, “the Agencies”) pursuant to section 39 of the FDI Act. 25 Section 39(a) of the FDI Act  26 required the Agencies to prescribe standards for safety and soundness relating to the following: (A) Internal controls and information systems; (B) internal audit systems; (C) loan documentation; (D) credit underwriting; (E) interest rate exposure; (F) asset growth; (G) asset quality; (H) earnings; and (I) compensation and benefits, as well as such other operational and managerial standards as appropriate. Section 39(b) of the FDI Act required the Agencies to prescribe standards for insured depository institutions related to asset quality, earnings, and stock valuation. 27 Further, section 39(c) of the FDI Act required the Agencies to develop standards related to preventing unsafe and unsound practices related to compensation arrangements. 28

In 1995, the Agencies published part 364 as a final rule with an appendix that implements Section 39(a) of the FDI Act regarding standards for safety and soundness (appendix A). 29 Later, part 364, appendix A was amended to reflect subsections 39(b) and (c) of the FDI Act. 30 The OTS's part 570, as amended, implemented section 39 of the FDI Act for all savings associations. 31

The FDIC's part 364, appendix A (regarding safety and soundness) and appendix B (regarding information security) implement section 39 of the FDI Act. 32 Section 364.101 of part 364 provides that appendix A and appendix B apply to all insured State nonmember banks, State-licensed insured branches of foreign banks, and State savings associations.

Generally, part 364, appendix A addresses operational and managerial standards, compensation standards, and standards related to asset quality, earnings, and stock valuation and also provides that an institution should have internal controls and information systems that are appropriate to the size of the institution and the nature, scope, and risk of its activities and that provide for: (1) An organizational structure that establishes clear lines of authority and responsibility for monitoring adherence to established policies; (2) effective risk assessment; (3) timely and accurate financial, operational, and regulatory reports; (4) adequate procedures to safeguard and manage assets; and (5) compliance with applicable laws and regulations.

With respect to timely and accurate financial, operational and regulatory reports, FDIC-supervised institutions are required to prepare such reports in accordance with generally accepted accounting principles  33 (GAAP) and are also required to file quarterly Reports of Condition. 34

Appendix A of part 364 also addresses loan documentation, requiring institutions to establish and maintain loan documentation practices that: (1) Enable the institution to make informed lending decisions and to assess risk, as necessary, on an ongoing basis; (2) identify the purpose of a loan and the source of repayment, and assess the ability of the borrower to repay the indebtedness in a timely manner; (3) ensure that any claim against a borrow is legally enforceable; (4) demonstrate appropriate administration monitoring of a loan; and (5) take account the size and complexity of the loan. 35

Appendix A of part 364 sets standards for asset quality and provides that an insured depository institution “establish and maintain a system that is commensurate with the institution's size and the nature and scope of its operations to identify problem assets and prevent deterioration of those assets”  36 by: (1) Conducting periodic asset quality reviews to identify problem assets; (2) estimating the inherent losses in those assets and establish reserves that are sufficient to absorb estimated losses; (3) comparing problem asset totals to capital; (4) taking appropriate corrective action to resolve problem assets; (5) considering the size and potential risks of material asset concentrations; and (6) providing periodic asset reports with adequate information for management and the board of directors to assess the level of asset risk. 37

Taken together, part 364 and appendix A constitute the FDIC's long-standing expectations for all prudently managed insured depository institutions, but leave specific methods of achieving these objectives to each institution. Specifically, they provide a framework for sound corporate governance and the supervision of operations designed to prompt an institution to identify emerging problems and correct deficiencies before capital becomes impaired. The FDIC uses these standards in its supervisory examination process in order to assess an institution's risk profile and assign an appropriate rating during the supervisory examination process, with material deficiencies documented in the Report of Examination. Pursuant to section 39(e) of the FDI Act, 38 an FDIC-supervised institution's failure to meet the standards may cause the FDIC to require the institution to submit a safety and soundness compliance plan and if the institution does not comply with its plan, the FDIC will issue an order to correct safety and soundness deficiencies. 39

Former OTS section 560.1, as modified by the FDIC in transferred section 390.260, provided the general authority and scope for safety-and-soundness-based lending and investment for State savings associations. It is substantively similar to 12 CFR 364.101. Because the two regulations are substantively similar and section 364.101 already applies to State savings associations, the FDIC considers it duplicative to retain section 390.260. Accordingly, the FDIC proposes that section 390.260 be rescinded.

Former section 560.3 provided a set of definitions to several commonly used terms related to lending, such as “consumer loans,” home loans,” “real estate loans,” and “credit card,” and it is not expressly duplicative of or substantively similar to any corresponding FDIC regulation. However, as transferred and redesignated by the FDIC, the definitions contained in section 390.262 are only relevant to the provisions of part 390, subpart P. Specifically, section 390.262 provides a list of definitions “[f]or purposes of this subpart.”  40 Because the FDIC has concluded that the substantive provisions of part 390, subpart P are unnecessary, redundant, or otherwise duplicative of other FDIC regulations, it follows that the definitions contained in section 390.262 that are only relevant to subpart P are also unnecessary. Accordingly, the FDIC considers section 390.262 to be unnecessary and proposes that it be rescinded.

Former section 560.130 addressed loan procurement fees, and is not expressly duplicative of or substantively similar to any corresponding FDIC regulation. This section was originally transferred to the OTS from the Bank Board in 1989  41 and has been the subject of a regulatory clarification and an OTS interpretative letter. 42 Specifically, the provision had applied to affiliated persons of savings associations but, in response to requests for clarification and public comment, the OTS revised it to apply only to natural persons. 43 As transferred to the FDIC, section 390.269 provides,

Although the OTS maintained this provision in its regulations since 1989, of the other Federal banking agencies, only the OCC has a corresponding provision in its regulations, as the OCC also transferred former section 560.130 from the OTS. 45 Rather than identify and prohibit particular types of compensation or fees on a case-by-case basis, the FDIC's approach has been to act against compensation practices that are unsafe or unsound, or represent a breach of an officer's or director's duty not to place his or her own interests ahead of those of the institution; and where necessary, the FDIC can take action under section 8 of the FDI Act. 46 Because the FDIC can act against compensation practices that are demonstrably unsafe or unsound or a breach of fiduciary duty, the FDIC considers section 390.269 to be unnecessary and proposes that it be rescinded.

Former OTS section 560.160, entitled “Asset Classification,” required savings associations to classify their assets on a regular basis in accordance with the OTS's Thrift Activities Handbook. 47 The regulation originally was transferred to the OTS from the Bank Board in 1989 and it contained specific accounting classification metrics. 48 It was revised over time in response to initiatives to modernize and streamline Federal banking regulations. 49 Commenters had suggested that the OTS remove the classification metrics from the regulation and move them to the Thrift Activities Handbook. 50 In response to these comments, the OTS simplified former section 560.160 but retained portions of the regulation to ensure that a savings association's board of directors would be responsible for monitoring its classification system.

Transferred to the FDIC as section 390.270, the current regulation requires, among other things, State savings associations to classify assets on a regular basis in a manner consistent with the classification system used by the FDIC and to establish adequate valuation allowances or charge-offs, as appropriate, consistent with GAAP and the practices of the Federal banking agencies. The FDIC's implementation of part 364, appendix A provides the FDIC's minimum standards for establishing and maintaining “a system that is commensurate with the institution's size and the nature and scope of its operations to identify problem assets and prevent deterioration of those assets.”  51

State savings associations are already expected to maintain an appropriate level of allowance for loan and lease losses in accordance with GAAP. Because safety and soundness principles require all insured depository institutions for which the FDIC is the appropriate Federal banking agency—including State savings associations—to provide timely and accurate financial, operational, and regulatory reports in accordance with GAAP, the FDIC considers section 390.270 to be unnecessary and proposes that it be rescinded.

As transferred to the FDIC, section 390.271 requires State savings associations to establish and maintain loan documentation practices that mirror all of the requirements of part 364, appendix A. Because the lending documentation practices and requirements contained in section 390.271 are contained in part 364, appendix A, as discussed above, the FDIC considers section 390.271 to be unnecessary and proposes that it be rescinded.

Former OTS section 560.172 also was part of the transfer to OTS and recodification of Bank Board regulations in 1989. 52 It originally addressed re-evaluation of assets and, among other things, required a savings association to appraise each parcel of real estate owned at the earlier of in-substance foreclosure or at the time of the savings association's acquisition, and at such times thereafter as dictated by prudent management policy or as required by the OTS' regional director. 53 The provision did not apply to real estate owned by the institution that was sold and reacquired less than 12 months subsequent to the most recent appraisal. The form of the regulation transferred to the FDIC as section 390.272 remains substantively the same as the most recent version adopted by the former OTS. 54

As transferred to the FDIC, section 390.272 is not duplicative of any other existing FDIC regulation. However, as discussed in part III.B.1. of this SUPPLEMENTARY INFORMATION section, above, the FDIC relies on part 364, appendix A to convey its expectation that FDIC-supervised institutions should “establish and maintain a system that is commensurate with the institution's size and the nature and scope of its operations to identify problem assets and prevent deterioration of those assets”  55 and, as State-chartered institutions, to follow State law with respect to the initial and subsequent valuations of other real estate (ORE). 56 The FDIC expects all supervised institutions to adhere to part 364 with regard to maintaining a system to identify and manage problem assets (including ORE) and to provide for timely and accurate financial, operational, and regulatory reports according to GAAP and the Call Report Instructions as it pertains to the appropriate carrying value of ORE. Further, State law generally provides for when an appraisal is necessary for State-chartered institutions (including savings associations). Therefore, the FDIC considers section 390.272 to be unnecessary and proposes that it be rescinded.

Accordingly, as explained in the analysis above, the FDIC proposes to remove sections 390.260, 390.262, 390.269, 390.270, 390.271 and 390.272 of part 390, subpart P because these sections are unnecessary, redundant of, or otherwise duplicative of the safety and soundness standards delineated in part 364 and its appendix A.

Section 304 of the Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA) required the Agencies to adopt uniform regulations prescribing standards for extensions of credit that are secured by liens on interests in real estate or made for the purpose of financing the construction of a building or other improvements to real estate. 57 The Agencies published their joint rule and appendices for real estate lending on the last day of 1992, and the rules became effective on March 19, 1993. 58 The FDIC's regulation is found at part 365, subpart A, which includes an appendix A regarding real estate lending.

Former OTS sections 560.100 and 560.101 (including the appendix) implemented real estate lending provisions, as required by FDICIA. Former sections 560.100 and 560.101 were transferred to the FDIC as sections 390.264 and 390.265 (including the appendix to part 365, subpart A). These regulations are nearly identical to 12 CFR 365.1 and 365.2 (including appendix A to part 365, subpart A). However, in order to include State savings associations within the scope of part 365 and its appendix A, it is necessary for the FDIC to make the technical amendment as discussed in section IV of this SUPPLEMENTARY INFORMATION section, below.

Because the FDIC considers sections 390.264 and 390.265 (including the appendix to section 390.265) to be duplicative of part 365, subpart A, as proposed to be amended herein, the FDIC proposes to rescind and remove them from the Code of Federal Regulations.

As discussed in part III.C of this SUPPLEMENTARY INFORMATION , the FDIC's part 365 subpart A addresses real estate lending standards for insured State nonmember banks (including State-licensed insured branches of foreign banks). The Dodd-Frank Act added State savings associations to the list of entities for which the FDIC is designated as the appropriate Federal banking agency. 59 To clarify that part 365 applies to all institutions for which the FDIC is the appropriate Federal banking agency, the FDIC proposes to amend sections 365.1 and 365.2 of part 365 to replace the phrases “insured state nonmember banks (including state-licensed insured branches of foreign banks)” and “state nonmember bank” throughout subpart A with the phrase “FDIC-supervised institution.” Under the proposal, section 365.1 would be revised to add the definition of the term “FDIC-supervised institution” to mean any insured depository institution for which the FDIC is the appropriate Federal banking agency pursuant to section 3(q) of the FDI Act. 60

The FDIC issued part 365, subpart B to implement the Federal registration requirements for mortgage loan originators required by the S.A.F.E. Act. As relevant here, the S.A.F.E. Act required the Agencies, the Farm Credit Administration, and National Credit Union Administration (the “S.A.F.E. Act Agencies”) to develop and maintain a system for registering mortgage loan originators employed by institutions regulated by the agencies. 61

However, the Dodd-Frank Act amended the S.A.F.E. Act, transferring that authority from the S.A.F.E. Act Agencies to the Bureau. 62 On December 19, 2011, the Bureau published an interim final rule incorporating the S.A.F.E. Act into its Regulation G. On April 28, 2016, the Bureau finalized the interim final rule, which is substantially duplicative to the FDIC's S.A.F.E. Act regulation at part 365, subpart B. The Bureau's regulation addresses Federal registration requirements for mortgage loan originators and applies to all FDIC-supervised institutions. 63 As such, the FDIC proposes to rescind part 365, subpart B because it is outdated and no longer necessary.

If the proposal is finalized, 12 CFR part 390, subpart P would be removed because it is largely unnecessary, redundant, or duplicative of existing FDIC regulations; the requirements of part 365, subpart A expressly would apply to all FDIC-supervised insured depository institutions; and part 365 subpart B would be removed because it is outdated and no longer necessary due to the transfer of S.A.F.E. Act rulemaking power to the Bureau. These three initiatives will serve to streamline the FDIC's regulations and reduce the regulatory burden on FDIC-supervised institutions.

As explained in detail in Section III of this SUPPLEMENTARY INFORMATION section, certain OTS regulations transferred to the FDIC by the Dodd-Frank Act relating to lending and investment are either unnecessary or effectively duplicate existing FDIC regulations. This proposal would eliminate those transferred OTS regulations. The proposal also would clarify that the standards in part 365 apply to State savings associations because the FDIC is the “appropriate Federal banking agency” pursuant to the FDI Act.

As of June 30, 2018, the FDIC supervises 3,575 depository institutions, of which 41 (1.1%) are State savings associations. The proposed rule primarily would affect regulations that govern State savings associations.

As explained previously, the proposed rule would remove sections 390.260, 390.261, 390.262, 390.263, 390.264, 390.265, 390.266, 390.267, 390.268, 390.269, 390.270, 390.271, and 390.272 of part 390, subpart P because these sections are unnecessary, redundant of, or otherwise duplicative of other FDIC regulations regarding safety and soundness. Because these regulations are redundant to existing regulations, rescinding them will not have any substantive effects on FDIC-supervised institutions.

Thus, for example, as explained previously, part 364 covers State savings associations in section 364.101 and its appendix A. Because the lending documentation practices and standards in part 364, appendix A are substantively similar to existing regulations for State savings associations found in section 390.271, rescission of section 390.271 would not have any substantive effects on FDIC-supervised institutions. The same would be true for the other sections of part 390, subpart P.

The proposed rule would amend part 365, subpart A so that it would expressly apply to State savings associations. Because the real estate lending requirements in sections 365.1 and 365.2 and appendix A to part 365, subpart A are substantively identical to currently applicable regulations for State savings associations found in 390.264 and 390.265 (including the appendix to 390.265), amending part 365, subpart A to include State savings associations would not have any substantive effects on FDIC-supervised institutions.

Finally, as previously explained, the proposed rule would rescind part 365, subpart B because the authority to implement Federal registration requirements for mortgage loan originators has been transferred by statute to the Bureau. Because rulemaking authority for the S.A.F.E. Act was transferred to the Bureau in December 2011, the removal of the FDIC's S.A.F.E. Act regulations would not have any substantive effects on FDIC-supervised institutions.

The FDIC invites comments on all aspects of this analysis. In particular, would the proposed rule have any costs or benefits to covered entities that the FDIC has not identified?

The FDIC has considered alternatives to the proposed rule but believes that the proposed amendments represent the most appropriate option for covered institutions. As discussed previously, the Dodd-Frank Act transferred certain powers, duties, and functions formerly performed by the OTS to the FDIC. The FDIC's Board reissued and redesignated certain transferred regulations from the OTS, but noted that it would evaluate them and might later incorporate them into other FDIC regulations, amend them, or rescind them, as appropriate. The FDIC has evaluated the existing regulations relating to lending and investment of covered entities, including part 365 and part 390, subpart P. The FDIC considered the status quo alternative of retaining the current regulations but did not choose to do so because it would be needlessly complex for substantively similar regulations regarding lending and investment activities of State nonmember banks and State savings associations to be located in different locations within the Code of Federal Regulations. The FDIC believes it would be procedurally complex for FDIC-supervised institutions to continue to refer to these separate sets of regulations. Therefore, the FDIC is proposing to amend and streamline the FDIC's regulations.

The FDIC invites comments on all aspects of this proposed rulemaking. In particular, the FDIC requests comments on the following questions:

1. Are the provisions of 12 CFR parts 362, 364, and 365 sufficient to provide consistent and effective requirements related to permissible lending and investment activities for all insured depository institutions for which the FDIC is the appropriate Federal banking agency? Please provide examples, data, or otherwise substantiate your answer.

2. What negative impacts, if any, can you foresee in the FDIC's proposal to rescind part 390, subpart P and part 365, subpart B and remove them from the Code of Federal Regulations?

3. As to the OTS's former rule prohibiting loan procurement fees, the FDIC noted above that no other Federal banking agency has a similar rule. Do you believe that a separate rule is necessary for safety and soundness reasons? Please provide examples, data, or otherwise substantiate your answer.

4. Please provide any other comments you have on the proposal.

In accordance with the requirements of the Paperwork Reduction Act of 1995 (PRA), 64 the FDIC may not conduct or sponsor, and the respondent is not required to respond to, an information collection unless it displays a currently valid Office of Management and Budget (OMB) control number.

The proposed rule would rescind and remove from FDIC regulations part 390, subpart P. With regard to part 365, subpart A, the proposed rule would amend sections 365.1 and 365.2 to clarify that State savings associations, as well as State nonmember banks and foreign banks having insured branches are all subject to part 365. It would also rescind and remove from the FDIC's regulations part 365, subpart B. The proposed rule will not create any new or revise any existing collections of information under the PRA. Therefore, no information collection request will be submitted to the OMB for review.

The Regulatory Flexibility Act (RFA), requires that, in connection with a notice of proposed rulemaking, an agency prepare and make available for public comment an initial regulatory flexibility analysis that describes the impact of the proposed rule on small entities. 65 However, a regulatory flexibility analysis is not required if the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities, and publishes its certification and a short explanatory statement in the Federal Register together with the rule. The Small Business Administration (SBA) has defined “small entities” to include banking organizations with total assets of less than or equal to $550 million. 66 For the reasons provided below, the FDIC certifies that the proposed rule, if adopted in final form, would not have a significant economic impact on a substantial number of small banking organizations. Accordingly, a regulatory flexibility analysis is not required.

As of June 30, 2018, the FDIC supervised 3,575 insured financial institutions, of which 2,804 are considered small banking organizations for the purposes of RFA. The proposed rule primarily affects regulations that govern State savings associations. There are 38 State savings associations considered to be small banking organizations for the purposes of the RFA. 67

As explained previously, the proposed rule would remove sections 390.260, 390.261, 390.262, 390.263, 390.264, 390.265, 390.266, 390.267, 390.268, 390.269, 390.270, 390.271, and 390.272 of part 390, subpart P because these sections are unnecessary, redundant of, or otherwise duplicative of other FDIC regulations for safety and soundness standards. Because these regulations are redundant to existing regulations, rescinding them would not have any substantive effects on small FDIC-supervised institutions.

As explained previously, part 364 covers State savings associations in section 364.101 and in appendix A. Because the lending documentation practices and standards in part 364, appendix A are substantively similar to existing regulations for State savings associations found in section 390.271 rescinding section 390.271 and the rest of part 390, subpart P would not have any substantive effects on small FDIC-supervised institutions.

As stated previously, the proposed rule would amend part 365, subpart A so that it would expressly apply to State savings associations. Because the real estate lending requirements in sections 365.1 and 365.2 and part 364, appendix A are substantively identical to currently applicable regulations for State savings associations found in 390.264 and 390.265 (including the appendix to section 390.265), amending part 365, subpart A so that it would apply to all FDIC-supervised institutions would not have any substantive effects on small FDIC-supervised institutions.

As explained previously, the proposed rule would rescind part 365, subpart B because the authority to implement Federal registration requirements for mortgage loan originators has been transferred by statute to the Bureau. Because rulemaking authority for the S.A.F.E. Act was transferred to the Bureau in December 30, 2011, the removal of the FDIC's S.A.F.E. Act regulations would not have any substantive effects on small FDIC-supervised covered institutions.

Based on the information above, the FDIC certifies that the proposed rule would not have a significant economic impact on a substantial number of small entities.

5. The FDIC invites comments on all aspects of the supporting information provided in this RFA section. In particular, would this rule have any significant effects on small entities that the FDIC has not identified?

Section 722 of the Gramm-Leach-Bliley Act  68 requires each Federal banking agency to use plain language in all of its proposed and final rules published after January 1, 2000. As a federal banking agency subject to the provisions of this section, the FDIC has sought to present the proposed rule to rescind part 390, subpart P and amend part 365 in a simple and straightforward manner.

6. The FDIC invites comments on whether the proposal is clearly stated and effectively organized, and how the FDIC might make the proposal easier to understand.

Under section 2222 of the Economic Growth and Regulatory Paperwork Reduction Act of 1996 (EGRPRA), the FDIC is required to review all of its regulations, at least once every 10 years, in order to identify any outdated or otherwise unnecessary regulations imposed on insured institutions. 69 The FDIC, along with the other federal banking agencies, submitted a Joint Report to Congress on March 21, 2017, (EGRPRA Report) discussing how the review was conducted, what has been done to date to address regulatory burden, and further measures that will be taken to address issues that were identified. As noted in the EGRPRA Report, the FDIC is continuing to streamline and clarify its regulations through the OTS rule integration process. By removing outdated or unnecessary regulations, such as part 390, subpart P and part 365, subpart B, and amending part 365, subpart A, this rule complements other actions the FDIC has taken, separately and with the other federal banking agencies, to further the EGRPRA mandate.

For the reasons stated in the preamble, the Board of Directors of the Federal Deposit Insurance Corporation proposes to amend title 12 of the Code of Federal Regulations as follows:

On October 11, 2018, the president signed into law the Orrin G. Hatch-Bob Goodlatte Music Modernization Act, H.R. 1551 (“MMA”). Title II of the MMA, the Classics Protection and Access Act, created chapter 14 of the copyright law, title 17, United States Code, which, among other things, extends remedies for copyright infringement to owners of sound recordings fixed before February 15, 1972 (“Pre-1972 Sound Recordings”). Under the provision, rights owners may be eligible to recover statutory damages and/or attorneys' fees for the unauthorized use of their Pre-1972 Sound Recordings if certain requirements are met. To be eligible for these remedies, rights owners must typically file schedules listing their Pre-1972 Sound Recordings (“Pre-1972 Schedules”) with the U.S. Copyright Office, which are indexed into the Office's public records. 1 The filing requirement is “designed to operate in place of a formal registration requirement that normally applies to claims involving statutory damages.”  2

The MMA also creates a new mechanism for members of the public to obtain authorization to make noncommercial uses of Pre-1972 Sound Recordings that are not being commercially exploited. Under section 1401, a person may file a notice with the Copyright Office and propose a specific noncommercial use after taking steps to determine whether the recording is, at that time, being commercially exploited by or under the authority of the rights owner. 3 Specifically, before determining that the recording is not being commercially exploited, she must first undertake a “good faith, reasonable search” of both the Pre-1972 Schedules indexed by the Copyright Office and music services “offering a comprehensive set of sound recordings for sale or streaming.”  4 At that point, she may file a notice identifying the Pre-1972 Sound Recording and nature of the intended noncommercial use with the Office (a “notice of noncommercial use” or “NNU”). 5 The Office will index this notice into its public records. 6

In response, the rights owner of the Pre-1972 Sound Recording may file a notice with the Copyright Office “opting out” of ( i.e., objecting to) the requested noncommercial use (“Pre-1972 Opt-Out Notice”), and if the user nonetheless engages in the noncommercial use, such use may subject the user to liability under section 1401(a) if no other limitation on liability applies. 7 The rights owner of the Pre-1972 Sound Recording has 90 days from when the NNU is indexed into the Office's public records to file a Pre-1972 Opt-Out Notice. 8 If, however, the rights owner does not opt-out within 90 days, the user may engage in the noncommercial use of the Pre-1972 Sound Recording without violating section 1401(a). 9

Under the Classics Protection and Access Act, the Copyright Office must issue regulations identifying the “specific, reasonable steps that, if taken by a [noncommercial user of a Pre-1972 Sound Recording], are sufficient to constitute a good faith, reasonable search” of the Office's records and music services to support a conclusion that a relevant Pre-1972 Sound Recording is not being commercially exploited. 10 A user following the “specific, reasonable steps” identified by the Office will satisfy the statutory requirement of conducting a good faith search, even if the sound recording is later discovered to be commercially exploited. 11 Other searches may also satisfy this statutory requirement, but the user would need to independently demonstrate how she met the requirement if challenged. 12

The Office must also issue regulations “establish[ing] the form, content, and procedures” for users to file NNUs and rights owners to file Pre-1972 Opt-Out Notices. 13

On October 16, 2018, the Office issued a notice of inquiry (“NOI”) soliciting comments regarding the specific steps a user should take to demonstrate she has made a good faith, reasonable search. 14 The Office also solicited comments regarding the filing requirements for the user to submit an NNU and for a rights owner to submit a Pre-1972 Opt-Out Notice objecting to such use. 15 In response, the Office received ten initial comments and fifteen reply comments, which are discussed further below. 16 Having reviewed and carefully considered the comments, the Office now issues a proposed rule and invites further public comment.

This document (the “NPRM”) proposes regulatory language regarding three specific areas: (i) The “specific, reasonable steps that, if taken by a [noncommercial user of a Pre-1972 Sound Recording], are sufficient to constitute a good faith, reasonable search” to support a conclusion that a relevant Pre-1972 Sound Recording is not being commercially exploited;  17 (ii) the form, content, and procedures for a user, having made such a search, to file an NNU; and (iii) the form, content, and procedures for a rights owner to file a Pre-1972 Opt-Out Notice. 18

In proposing the following regulatory language, the Office also confirms, as requested by multiple commenters, that the noncommercial use exception under section 1401(c) is supplementary, and does not negate other exceptions and limitations that may be available to a prospective user, including fair use and the exceptions for libraries and archives. 19 Section 1401(f) separately provides that “the limitations on the exclusive rights of a copyright owner described in section 107, 108, 109, 110, and 112(f) shall apply to a claim under [section 1401(a)] with respect to a sound recording fixed before February 15, 1972,” as well as the section 512 limitation on liability relating to material online. 20 Further, section 1401(c) states that whether “a person files notice of a noncommercial use of a sound recording” or “a rights holder opts out of a noncommercial use of a sound recording,” that “does not itself enlarge or diminish any limitation on the exclusive rights of a copyright owner described in section 107, 108, 109, 110, or 112(f) as applied to a claim under [section 1401(a)].”  21 These other exceptions and limitations are available to users whether or not they claim the exception for noncommercial use. 22 Regarding fair use specifically, the Office notes that although certain noncommercial uses may constitute fair use, not all may be fair; instead, courts will balance the purpose and character of the use against the other fair use factors. 23

Similarly, multiple stakeholders commented that the noncommercial use exception should not affect application of the section 108(h) exception available for libraries and archives performing a reasonable investigation regarding the availability of published works in the last twenty years of their copyright term. 24 These commenters rightly note that sections 1401(c) and 108(h) contain differing statutory criteria regarding the type of search or investigation that must be made before making use of the respective exceptions, and the present rulemaking is focused on administering the exception for Pre-1972 Sound Recordings under section 1401(c). 25 Moreover, section 108(h) is not limited to sound recordings (much less Pre-1972 Sound Recordings); as discussed below, the proposed regulations governing a “good faith, reasonable search” for purposes of section 1401(c) specifically consider the various ways sound recordings are brought to market.

Finally, the Copyright Office keenly appreciates that “some of the users hoping to use [Pre-1972 Sound Recordings] may not have much copyright law background.”  26 In connection with the Office's overall public information and education initiatives and the promulgation of a final rule, the Office intends to prepare additional public resources regarding Pre-1972 Sound Recordings and the new noncommercial use exception, including potentially a public circular. By the same token, the Office appreciates A2IM and RIAA's view that “the average person knows full well how to construct an effective internet search designed to uncover a very specific item or information for which they are looking,” and so while the proposed rule does not presume an expertise in copyright, it does presume a functional search capability on the part of a human user. 27

The proposed rule identifies five steps (six in the case of Alaska Native and American Indian ethnographic sound recordings) that, if taken, will support a conclusion that a relevant Pre-1972 Sound Recording is not being commercially exploited. 28 Consistent with the statute's directive to provide “specific” steps that are “sufficient, but not necessary” to demonstrate a Pre-1972 Sound Recording is not being commercialized, the rule adopts a “checklist”  29 approach for users to search across categories rather than an “open-ended” approach to better provide certainty to users. 30 The proposed rule divides various types of sources into different categories, and requires users to progressively search in each category (if and until a match is found, with a match evidencing commercial exploitation of the Pre-1972 Sound Recording). 31 Categories to be searched are listed in recommended search order, to reduce the likelihood of duplicative searching. 32 Because in some cases, the type of recording ( e.g., classical music, jazz, or ethnographic sound recordings) may warrant searching an additional resource or more particularized search criteria, such additional criteria are included on a tailored basis, as applicable to a particular genre.

In short, the rule proposes searching the following:

1. The Copyright Office's database of Pre-1972 Schedules;

2. One of the following major search engines: Google, Yahoo!, or Bing;

3. One of the following major streaming services: Amazon Music Unlimited, Apple Music, Spotify, or TIDAL;

4. The SoundExchange ISRC database;

5. Amazon.com , and, where the prospective user reasonably believes the recording implicates a listed niche genre, an additional listed retailer of physical product; and

6. In the case of ethnographic Pre-1972 Sound Recordings of Alaska Native or American Indian tribes or communities, searching through contacting the relevant tribe, association, and/or holding institution

The NOI generated a wide range of helpful comments from a rich variety of perspectives, and the proposed rule represents a compromise amongst those views. While this NPRM will no doubt draw out additional thoughtful comments, the Office is optimistic that this proposed rule strikes an appropriate balance, achieving the goal of crafting a practical rule with steps that are reasonable to expect of an individual user, yet exhaustive enough to qualify that user for a safe harbor as to the search's sufficiency from the perspective of rights owners' interests. Although a range of stakeholders agreed in principle with this goal, 33 views differed as to how many steps should constitute a “good faith, reasonable search.” For example, Public Knowledge suggested that users need only search the Office's database of Pre-1972 Schedules and “no more than one to two” streaming services, 34 while A2IM and RIAA proposed nine categories of steps to be searched. 35 In synthesizing the public comments, the Copyright Office notes that the statute expressly contemplates searching on multiple services, including those offering sound recordings “for sale”  36 in addition to streaming services, and a congressional report characterizing the search requirement as “robust.”  37

In proposing this rule, the Copyright Office is also mindful of the individual and smaller-group interests from both rights owner and licensee or other user perspectives. The Office is concerned that limiting sources to be searched to only the most commercially popular services might obscure perspectives of “smaller, less mainstream creators” and independent services who themselves play a vital role in ensuring that a diverse array of cultural contributions are created and made available to the public. 38 As FMC notes, artists may deliberately “target niche markets and collectors—sometimes with careful remastering and extensive historical information,” or may opt not to make their entire catalog available on mainstream streaming services. 39 The proposed rule attempts to account for the diversity of practices and leave room for these competing business models to innovate and flourish. But the proposed rule also takes into account smaller users. It tries to prioritize services with intuitive search capabilities and minimize resources where a subscription is required to access the search function; further, the categories to be searched—with the potential exception of interactive streaming services, which all commenters agree are statutorily required to be included in a search—are all available at no cost to the user. 40 As noted below, the Office has declined to include various suggestions that might be redundant or overly burdensome, and some criteria are included only as applicable to a particular genre of work. The proposed rule also does not require “consultation with an experienced music clearance professional,” although the Office does not discourage such consultation, which may prove helpful to a user planning a wide-scale or complex use case. 41

In proposing the following search criteria, the Office agrees with various rights holders that the noncommercial use exception is not intended to displace the important role of licensed transactions to facilitate the use of Pre-1972 Sound Recordings. 42 Indeed, a main thrust of Title II is to “create royalties” for these works using the same rates and distribution system already applicable for post-72 works, particularly by music services that previously used pre-1972 works “while paying royalties for post-72 works.”  43 In this rulemaking, Copyright Alliance has asked the Office to require a user to directly notify a rights owner if that owner can be located. 44 While the Office agrees that, practically speaking, the noncommercial use exception may be unavailable for many works where the rights owner is readily identifiable since those works are more likely to be commercially exploited, 45 the statute does not require users to contact rights owners or determine that they cannot be located before relying on the section 1401(c) exception. 46 Instead, the purpose of the good faith, reasonable search is “to determine whether the sound recording is being commercially exploited by or under the authority of the rights owner.”  47 Although the Conference Report states that the noncommercial use exception is “provided primarily to enable use of older recordings where it may not be clear to a user how to contact the rights owner to ask for permission,”  48 use of the word “primarily” indicates that Congress contemplated situations where the rights owner may be known to the user, but the owner has ceased or otherwise refrained from commercially exploiting the sound recording. In any event, comments suggest that a large array of Pre-1972 Sound Recordings do not have an identifiable owner, in which cases a prospective user making use of the section 1401(c) safe harbor and filing an NNU can expect to benefit from this additional exception. 49

Similarly, multiple commenters pointed out differences between section 1401(c)'s requirement to identify whether a work is being commercially exploited with prior proposals regarding orphan works, including a 2008 bill which provided a description of a “qualifying search, in good faith, to locate and identify the owner of the infringed copyright” before making use of an orphan work. 50 For these reasons, while the Office hopes that the MMA's noncommercial use provision may well prove to yield useful insights into the broader orphan works debate, the proposed rule is necessarily tailored to the sui generis noncommercial use exception for Pre-1972 Sound Recordings and was not crafted to specifically address that ongoing debate. 51

Finally, while the proposed rule is intended to take into account the current music marketplace, Congress has provided regulatory flexibility so that the Copyright Office may periodically update its list of specific steps to take into account changes in the music landscape, and the Office expects to exercise that authority as warranted by changes in the marketplace. 52

First, section 1401(c) requires that for a search to constitute a good faith, reasonable search, the search must include searching for the Pre-1972 Sound Recording in the Copyright Office's database of Pre-1972 Schedules. 53 The Office has issued an interim rule governing how rights owners may file Pre-1972 Schedules and how they are made publicly available through an online database. 54 For each sound recording, the Pre-1972 Schedule must include the rights owner's name, the sound recording title, and the featured artist, and rights owners may opt to include additional information, such as album title. 55

For this rulemaking, the proposed rule would require users to search for the title and featured artist(s) of the Pre-1972 Sound Recording. If the user knows any of the following attributes of the Pre-1972 Sound Recording, the search must also include searching: Alternate artist name(s), alternate title(s), album title, and the International Standard Recording Code (“ISRC”). The user may also optionally search any other attributes known to the user of the sound recording, such as label, version, or Universal Product Code (“UPC”). The following fields in the Office's database of Pre-1972 Schedules will be searchable: Rights owner, sound recording title (which includes alternate titles), album, label, featured artist (which includes alternate artist name(s)), and ISRC. In response to comments, the Office is pleased to report that its database of Pre-1972 Schedules already allows for wildcard searching by using an asterisk to fill in partial words. 56 A user can export and download the search results based on those fields into an Excel spreadsheet to view (and search) additional data, such as version or UPC.

Second, the proposed rule asks the user to search for the Pre-1972 Sound Recording using at least one major search engine, namely: Google, Yahoo!, or Bing, to determine whether the sound recording is being commercially exploited. 57 Users are widely accustomed to conducting internet searches, and such searching is free and may render searching on a streaming service or other service unnecessary. For example, a search on the phrase “rockin around the christmas tree” using Google—to locate the 1958 recording “Rockin' Around the Christmas Tree” featuring artist Brenda Lee—shows, among other things, that the sound recording is available for streaming on Spotify, Google Play Music, Deezer, and Apple Music. 58 Similarly, a search on the combined phrases “rockin around the christmas tree” and “purchase” using Google shows that the same sound recording is available for sale as an .mp3 file download and on a compact disc through Amazon.com . The proposed rule, as well as the Office's form or instructions, will make clear this search is to determine whether the Pre-1972 Sound Recording is being commercially exploited ( i.e., by being offered for sale in download form or as a new (not resale) physical product, or through a streaming service), and not simply whether the internet includes web pages discussing the recording, such as musicological, historical, or other commentary about the work.

Third, the proposed rule asks the user to search at least one of the following streaming services, each of which offers tens of millions of tracks:  59 Amazon Music Unlimited, 60 Apple Music, 61 Spotify, 62 or TIDAL. 63 The Office proposes these streaming services because, among the commenters who proposed specific streaming services to search, there appears to be agreement on these services in particular. 64 In addition, these services currently offer some of the largest repertoires of tracks and “receive digital feeds from the major labels, large indie labels and significant distributors.”  65 The Office invites public comment on whether Google Play Music and/or Deezer should be included in the list of streaming services, as they also offer large repertoires of tracks but were not identified as possible sources from as many commenters.

A spectrum of commenters suggested that the rule should require a user to search multiple, but not all, such streaming services. 66 While it is clear that these services' repertoires are not identical—including because some rights owners may engage in exclusive streaming arrangements  67 —commenters also noted that searching multiple streaming services might be duplicative. 68 For example, internet Archive, citing its own efforts to “automat[e] the process of searching for commercial availability at scale,” suggests that a good faith, reasonable search “should entail performing a few high quality searches on a small number of large services rather than performing a low quality search across a large number of services.”  69 The Office invites comment on whether users should be required to search a greater number of these services.

The Office agrees that requiring repetitive searches of all these streaming services would likely be redundant. Instead, as explained further below, because Pre-1972 Sound Recordings can also be expected to be commercially exploited outside of these services, the proposed rule would limit the number of streaming services to be searched, but add qualitatively different sources to search, such as major search engines, the SoundExchange ISRC lookup tool, and, for certain niche genres, other specific resources. By requiring searches on only one of these comprehensive streaming services, the proposed rule also minimizes the potential financial burden on prospective users. To be sure, A2IM and RIAA note that the cost of these subscription services are “not very high,” suggesting that it is not unreasonable to ask users “to take on a handful of short-term subscription payments in order to gain a royalty-free license to valuable sound recordings.”  70

IMSLP.ORG contends that users conducting a good faith, reasonable search under section 1401(c) should be able to search streaming services using “Application Programming Interfaces (APIs) officially supported by the relevant service,” as APIs “considerably decrease the cost of performing such searches with no loss of accuracy.”  71 The Office invites public comment on whether the proposed rule should address whether users should be able to use officially-supported APIs to search and locate a Pre-1972 Sound Recording on a streaming service.

Fourth, the proposed rule asks the user to search for the Pre-1972 Sound Recording using the free online SoundExchange ISRC lookup tool (located at https://isrc.soundexchange.com/#!/search ) to search SoundExchange's database, which contains information for more than 27 million sound recordings, including Pre-1972 Sound Recordings. 72 An overwhelming number of stakeholders representing rights owners recommended inclusion of the SoundExchange ISRC lookup tool as an important category of search. 73 For its part, SoundExchange characterizes its database as “quite possibly the most authoritative and comprehensive database of sound recordings that have otherwise been commercially exploited.”  74 On the other hand, Public Knowledge objects to including this lookup tool because it is not itself a “service[ ] offering a comprehensive set of sound recordings for sale or streaming.”  75

Because the ISRC lookup tool allows users to freely and easily search a deep trove of sound recording information that rights owners themselves have submitted in connection with commercializing those recordings, including on multiple streaming services, the proposed rule tentatively concludes it is desirable and appropriate to include this tool as a step in a sufficient good faith, reasonable search. A few considerations buttress this conclusion. First, rights owners register and provide these data regarding their sound recordings so they can be paid for their use under the statutory and direct licenses administered by SoundExchange, including the compulsory licenses applicable for internet radio, satellite radio, cable TV music services, streaming into business establishments, and other services. 76 As a result, the database provides indicia of exploitation on a wide expanse of music services that the Office does not otherwise propose searching before a user may qualify for the safe harbor under section 1401(c) ( e.g., Pandora, Sirius XM, iHeartRadio, MusicChoice, and over 3,100 other non-interactive digital streaming services). 77 While not disputing that these types of non-interactive services are exploiting Pre-1972 Sound Recordings, Public Knowledge and others propose excluding non-interactive services “because they are not usefully searchable for specific tracks.”  78 But unlike other parts of the copyright law, the reference to “services” in section 1401(c) does not distinguish between non-interactive and “interactive services.”  79 Given the acknowledged commercial exploitation on non-interactive services, it seems reasonable for a good faith search to cover this broader array of services. Second, this database appears to offer user friendly and granular results available for these recordings. Using the lookup tool is free, without requiring the user to establish an account, take a subscription, or convey any personal information. 80 It also apparently receives high marks regarding search confidence and ease, employing fuzzy matching and wildcard searching that a broad spectrum of commenters concur is helpful in gauging the accuracy of results. 81 Third, the information in the ISRC database is populated and verified by rights owners themselves, allaying concerns that inaccurate information may lead prospective users astray. 82 The uneven quality of publicly accessible music repertoire data is well-documented and indeed, an animating issue that the Music Modernization Act seeks to address in the context of the section 115 license. 83 As SoundExchange attests, “even when SoundExchange learns from a service of a putative recording not represented in its repertoire database, SoundExchange will not reflect the recording in its repertoire database unless identifying information for the recording is provided by the rights owner or authorized representative of the rights owner.”  84

The Office does not read section 1401(c) so narrowly as to preclude searching resources—such as the SoundExchange ISRC lookup tool or major search engines—that are used “ to determine whether” a Pre-1972 Sound Recording is being commercially exploited on services offering a comprehensive set of sound recordings for sale or streaming. 85 Such cross-platform tools can quickly reveal information relevant to whether a recording is being used on a variety of services that are unequivocally involved in commercially exploiting the sound recordings, but of which the Office does not propose searching for purposes of this safe harbor, as noted further below. To exclude reliance upon these sources would hamper the Office's ability to craft a smaller list of “specific, reasonable steps” that a user may take before filing a NNU. 86 Requiring a prospective user to search the ISRC lookup tool is thus expected to serve as a reasonable proxy for searches on a wide array of services that offer a comprehensive set of sound recordings for sale or streaming, and specifically, to address stakeholder concerns (from both the prospective user and rights owner perspectives) that it is otherwise difficult to determine exploitation by non-interactive services that offer limited user search capability. 87

Fifth, the proposed rule asks the user to search for the Pre-1972 Sound Recording on at least one major seller of physical product, namely Amazon.com , and if the user reasonably believes that the sound recording is of a niche genre such as classical music (including opera) or jazz, one smaller online music store offering recordings in that niche whose repertoires are searchable online, namely: ArkivJazz, ArkivMusic (classical), Classical Archives, or Presto (classical). Users of works in other genres are encouraged but not required to search Acoustic Sounds or Smithsonian Folkways Recordings ( e.g., international or “world” music, zydeco, folk, spoken word). 88 The Office invites public comment on whether, in addition to classical music and jazz, there are specific niche genres of Pre-1972 Sound Recordings that similarly should require the user to search another online music service offering a comprehensive set of recordings in that niche—and if so, to identify the specific sources to be searched.

The Office agrees that it is appropriate to limit safe harbor requirements to search for physical products to internet searches, 89 but finds it important that a good faith, reasonable search be calculated to include “services offering a comprehensive set of sound recordings for sale,”  90 as some works may be less available on streaming services, but are nonetheless being commercialized in physical formats, including reissues. 91 Although Public Knowledge and IMSLP.ORG express concern that sales of physical copies include second-hand sales, as opposed to commercial exploitation by the copyright owner, 92 physical retailers typically indicate whether the products are new or used, and others note the robust market for newly reissued albums. 93 For example, a search for “Faith and Grace” by The Staple Singers on Amazon.com allows users to purchase both new and used compact discs with that sound recording. 94

At the reply comment stage, concerns regarding the noncommercial use of ethnographic Pre-1972 Sound Recordings were raised by the National Congress of American Indians (“NCAI”), the oldest and largest national organization made up of Alaska Native and American Indian tribal government, and Professors Trevor Reed, Jane Anderson, and Robin Gray, who have worked on legal and cultural issues surrounding pre-1972 ethnographic sound recordings. NCAI asserts that “[t]he lack of complete and accurate information typically available on copyright interests in ethnographic sound recordings, and the cultural sensitivity of the contents of many ethnographic sound recording collections, merits consideration of special opt-out rules carefully tailored to the specific needs of Native American communities.”  95 As NCAI explains further:

Similarly, Professors Reed, Anderson, and Gray explain that “scholars have extensively documented the inequalities and ethical dilemmas surrounding early ethnographic field recording,” claiming that “ownership interests in pre-1972 ethnographic sound recordings are presumed to have vested in and remained with the performers who recorded them under the common-law rule,” but that unrelated holding institutions ( e.g., libraries, archives, museums, and universities) typically possess the master recordings. 97 Those professors suggest that regulations governing the noncommercial use exception under section 1401(c) “must be carefully tailored to the informational disadvantages Native American tribes and tribal members face as they attempt to locate and protect their rights to ethnographic sound recordings.”  98 Specifically, they maintain that for pre-1972 Native American ethnographic recordings, “a user should not qualify for the [section 1401(c)] safe harbor unless the relevant Native American tribe or tribes has certified the identity of the sound recording, its owner(s), and its current commercial uses.”  99

The Copyright Office is sensitive to the need to ensure that regulations governing the noncommercial use of Pre-1972 Sound Recordings do not adversely impact Alaska Native and American Indian tribes or communities. The Office has previously noted that ethnographic field recordings “are an enormous source of cultural and historical information, and come with their own unique copyright issues,”  100 and that “librarians and archivists who deal with ethnographic materials must abide by the cultural and religious norms of those whose voices and stories are on the recordings.”  101 The Office appreciates that the public ownership record for these recordings may be less developed and/or indexed into major search engines, and that as a result, searches that are otherwise reasonable for a prospective user may fail to identify that a specific ethnographic recording is being commercially exploited by the rights owner. But the Office must also be careful not to exceed its regulatory authority, by, for example, imposing a requirement that the user obtain certification of the identity of the sound recording and its owner before making use of the safe harbor. 102

Accordingly, for ethnographic Pre-1972 Sound Recordings of Alaska Native or American Indian tribes or communities, if the user does not locate the relevant sound recording in the Copyright Office's database of Pre-1972 Schedules or other search categories, the proposed rule asks the user to contact the Alaska Native or Native American tribe and, if known to the user, the relevant holding institution to aid in determining whether the sound recording is being commercially exploited. 103 Specifically, the rule proposes that the user make contact by using contact information known to the user if applicable, and also by using the contact information provided in NCAI's tribal directory. 104 If no information is listed or the tribe is unknown to the user, the user should contact NCAI itself. The Office believes that this search step is a reasonable burden to ask prospective users of such expressions of cultural heritage in light of the complicated history of some of these sound recordings. The Office also expects that the notification requirement will prove useful to rights owners who wish to exercise discretion to opt out of the noncommercial use by filing notice in the Copyright Office. 105

The Copyright Office appreciates that these issues are nuanced and is committed to addressing them in a sensitive and thoughtful manner. The Office acknowledges that these comments were received in the reply comment stage, without opportunity for further comment. Because the Office must timely promulgate a rule for the safe harbor to be available to prospective users of all types of Pre-1972 Sound Recordings, 106 interested parties are encouraged to submit written comments or contact the Office for a meeting to discuss this provisional aspect of the proposed rule.

The proposed rule is intended to be accurate and comprehensive, while minimizing redundancy. In proposing a list of “specific, reasonable” steps, the Office declines to add some additional search steps or services proposed by some commenters. Among suggestions received, the rule does not propose to include:

Notably, the proposed rule does not ask the user to search services based on the commercial exploitation of user-generated content, such as YouTube. Commenters IMSLP.ORG and Public Knowledge maintain that a search should not include services permitting user-uploaded content because such services include unauthorized uses of Pre-1972 Sound Recordings, which do not constitute commercial exploitation “by or under the authority of the rights owner” as required by section 1401(c)(1)(A). 110 By contrast, Recording Academy contends that Congress contemplated searching on services with user-uploaded streaming platforms. 111 The Office agrees that a good faith, reasonable search should be targeted at locating authorized instances of commercial exploitation, and the presumptive difficulty for online service providers to predetermine whether content is authorized by a rights owner is inherent to the section 512 safe harbor, which limits liability for such services displaying user-uploaded infringing content. 112 Because a user conducting a section 1401(c) search on a service permitting user-uploaded content may have no way of knowing if the use of a Pre-1972 Sound Recording is “by or under the authority of the rights owner,”  113 the proposed rule does not require the user to search on a service permitting user-uploaded content.

As discussed above, the proposed rule aims to strike a balance between the reasonableness and comprehensivity of the search for this particular subset of works, and can be updated as market conditions warrant. The Office believes that the proposed steps, including the requirement to search major search engines, which may index some of the information contained in the above services, will result in identifying a vast amount of the Pre-1972 Sound Recordings being commercially exploited at the time searches are conducted. If a rights owner is concerned about recordings being overlooked, the Office encourages the filing of a Pre-1972 Schedule and/or monitoring the filing of NNUs for the opportunity to opt out of a particular requested noncommercial use.

Likewise, in commenting on the proposed rule, it would be helpful for user-oriented groups to acknowledge that a list of specific steps should be reasonably calculated to identify recordings being commercially exploited, even where this entails added searching steps of the prospective user. 114 The Office does not believe the proposed rule to be unwieldly from the user perspective. Moreover, while the statute is very clear that following this closed-list of steps is sufficient to qualify for the safe harbor, 115 the proposed rule does not intend to discourage users from taking additional steps that they believe may be fruitful in identifying commercial exploitation of a given Pre-1972 Sound Recording, or in locating the rights owner to negotiate a permissive use, including by searching these additional sources identified by commenters.

In general, the proposed rule asks a user to search on the title and featured artist(s) of the Pre-1972 Sound Recording in the various search categories. If the user knows any of the following attributes of the Pre-1972 Sound Recording, and the source has the capability for the user to search any of the following attributes, the user must also search: Alternate artist name(s), alternate title(s), album title, and the International Standard Recording Code (“ISRC”). The user may also optionally search any other attributes known to the user of the sound recording, such as label, version, or Universal Product Code (“UPC”). Narrowing a search by these attributes may inform a user's good faith, reasonable determination whether or not a Pre-1972 Sound Recording is being commercially exploited. 116 Because “year” may refer to year of a record's release or re-release, rather than year of recording, the proposed rule does not require searching this attribute.

Because classical music sound recordings require more information to sufficiently identify the sound recording, the proposed rule requires the user to search on additional attributes for those types of sound recordings. For example, the same conductor could have conducted Beethoven's Symphony No. 9 on multiple occasions, with the same or different orchestras. Even to the trained ear (or database), 117 distinguishing between sound recordings of those various performances may well be impossible without knowing the musical work's composer and opus, the conductor, the performers ( e.g., orchestra), and year of performance. Indeed, as with Beethoven's Symphony No. 9, the composer and opus effectively function as the work's title; the closest simile to a “featured artist” may be the conductor, featured performers, or ensemble, depending upon the work. 118 Accordingly, the proposed rule requires the user to search on these additional attributes when trying to determine whether a Pre-1972 Sound Recording of classical music is being commercially exploited.

The Office invites public comment on whether other, specific genres of sound recordings ( e.g., jazz) similarly can be reasonably expected to require searching additional terms to identify the sound recording sufficiently—and if so, what those additional attributes should be.

As noted below, prospective users must certify that they have conducted a good faith, reasonable search when filing NNUs. While the Office will not examine for a NNU's legal validity, it suggests that should the user find a “remastered” version of a Pre-1972 Sound Recording through searching in any of the categories listed in the proposed rule, such a finding likely evidences commercial exploitation of the Pre-1972 Sound Recording. The Office has previously noted that “remastering” a sound recording may consist of mechanical contributions or contributions that are too minimal to be copyrightable. 119 For example, it would be prudent for a user to consider a 1948 track that was remastered and reissued in 2015 to qualify as a Pre-1972 Sound Recording.

Stakeholders question whether the section 1401(c) exception applies to foreign Pre-1972 Sound Recordings ( i.e., Pre-1972 Sound Recordings originating outside the United States). EFF contends that the section 1401(c) exception does apply, “as nothing in the extensive and detailed language of the MMA authorizes such a carve-out.”  120 A2IM and RIAA appear to agree, contending that a search under section 1401(c) should include “leading digital services in relevant foreign countries including the country of origin or countries where the work is most popular, to the extent those services are accessible from the U.S.”  121 By contrast, IFPI maintains that the Office should clarify that the section 1401(c) exception applies only to foreign sound recordings that have “previously been exploited commercially in the US, thereby establishing a nexus between the US and the rightholder(s) in question.”  122

Prior to the enactment of the MMA, certain foreign Pre-1972 Sound Recordings were already granted copyright protection in the United States. 123 In 1994, the Uruguay Round Agreements Act (“URAA”) amended section 104A to automatically restore U.S. copyright protection to certain foreign works that had been in the public domain in the United States due to lack of copyright protection for Pre-1972 Sound Recordings more generally. 124 While copyright is restored automatically in eligible works, the owner of a restored work must notify reliance parties if they plan to enforce those rights, including constructively by filing a notice of intent to enforce with the Copyright Office. 125

The MMA revised section 301(c), which now states that “[n]otwithstanding the provisions of section 303, and in accordance with [section 1401], no sound recording fixed before February 15, 1972, shall be subject to copyright under [title 17].”  126 But section 1401 and the legislative history do not reference foreign recordings specifically, or refer to or revise section 104A, and there is no evidence of congressional intent to extinguish copyright protection granted to foreign Pre-1972 Sound Recordings under section 104A. 127

Section 1401 provides sui generis protection running parallel to any copyright protection afforded to foreign Pre-1972 Sound Recordings under section 104A. 128 While section 1401(c) operates as a limitation on the protection available under that new chapter, it does not explicitly limit title 17 copyright protection for certain foreign restored works ( i.e., copyright protection under section 104A). Whether the noncommercial use exception under section 1401(c) can immunize content actionable under title 17 for restored works that are foreign Pre-1972 Sound Recordings may ultimately be a matter for the courts to resolve. Because protection and enforcement for foreign restored rights is fact-intensive—implicating the specific source country, date and location of publication, duration of term in both the United States and the source country, and compliance with formalities—prospective users of foreign Pre-1972 Sound Recordings should proceed cautiously before relying on the section 1401(c) exception.

Stakeholders disagree as to whether a user may rely on searches conducted by third parties to meet the good faith, reasonable search requirement under section 1401(c). ARSC and EFF contend that users should be able to rely on previous searches conducted for a Pre-1972 Sound Recording when filing an NNU to avoid “duplicated effort”  129 and “nothing but make-work.”  130 By contrast, Copyright Alliance, A2IM, RIAA, and FMC maintain that users relying on searches of other users could create blanket exceptions of noncommercial use. 131

The Office agrees that reliance on a third-party search, unless the third party conducted the search as the user's agent, is not reasonable. The third party may have conducted an inadequate search and incorrectly concluded that a Pre-1972 Sound Recording is not being commercially exploited. Or, as noted by A2IM and RIAA, a Pre-1972 Sound Recording may become subject to commercial exploitation after a third party has conducted a search, but before another user desires to use the same sound recording for a noncommercial use under section 1401(c). 132 As noted below, a user will be required to certify that she conducted a good faith, reasonable search when submitting an NNU, and a user cannot certify the actions of an unrelated third party. Accordingly, the proposed rule does not permit a user to rely on a search conducted by a third party, unless the third party conducted the search as the user's agent.

To ensure that search results are not stale, the proposed rule states that the user (or the user's agent) must conduct a search under section 1401(c) within 90 days before submitting an NNU with the Office. 133 The Music Library Association asserts that if a search has been conducted within a certain timeframe, the search should not have to be repeated. 134 The Office agrees, and believes that 90 days is a reasonable timeframe for a search to remain fresh. 135 Accordingly, a user may rely on a search for a Pre-1972 Sound Recording that she (or her agent) has conducted for 90 days before submitting an NNU proposing a noncommercial use of the same sound recording.

Commenters offer various proposals on information to be required in NNUs, particularly regarding the level of detail required to describe the good faith, reasonable search and the proposed noncommercial use. Regarding the search, Copyright Alliance, A2IM, and RIAA maintain that the user should be required to describe and certify the steps taken for a search of the Pre-1972 Sound Recording in the NNU, 136 whereas the Music Library Association contends that a user should just have to state that she conducted a good faith search and found no commercial exploitation. 137 In addition, stakeholders disagree on whether the user should be required to document her search, such as by submitting screen shots from searched websites. 138 Copyright Alliance, A2IM, and RIAA also suggest that users should be required to certify their filings under penalty of perjury. 139

Regarding the proposed use of a Pre-1972 Sound Recording, Copyright Alliance, A2IM, and RIAA state that the user must sufficiently identify the Pre-1972 Sound Recording she wishes to use and the nature of the proposed use. 140 A2IM and RIAA note that without this information, “it is impossible for rights owners to exercise their opt-out right in any meaningful way.”  141 By contrast, EFF and Public Knowledge assert that the user should not have to provide a detailed description of the proposed use. 142 EFF and Public Knowledge also suggest that the Office should allow users to combine multiple notices of noncommercial use into a single filing, as well as opt-out notices directed to the same potential user. 143

After duly considering all of the public comments, the rule proposes to include a mix of required and optional information to establish a baseline of information that will be deemed sufficient for purposes of meeting the regulatory filing requirements, while encouraging users to provide additional descriptive material that may aid in the ensuing determination whether a Pre-1972 Opt-Out Notice is filed. Specifically, the proposed rule requires the user to provide:

1. The user's full legal name, and whether the user is an individual person or corporate entity, including whether the entity is a tax-exempt organization as defined under the Internal Revenue Code;

2. The title and featured artist(s) of the Pre-1972 Sound Recording desiring to be used;  144

3. If known, the alternate artist name(s), alternate title(s), album title, and ISRC; and

4. A description of the proposed noncommercial use, including a summary of the project and its purpose, how the Pre-1972 Sound Recording will be used in the project, and when and where the proposed use will occur ( i.e., the term and U.S.-based territory of the use).

The prospective user should describe the proposed use clearly and accurately, with enough detail to provide the rights owner with enough information to meaningfully evaluate the use. 145 The proposed categories comprise commonsense information, and the prospective user has flexibility in the description of the proposed use. 146 To aid filers, the Office's form or instructions may include exemplar descriptions of the proposed use. As discussed further below, while the proposed rule does not define “noncommercial” for purposes of this filing, the Office's form, instructions, and other material will be intended to aid individuals in determining how a desired use is likely to relate to the exception for noncommercial uses.

Further recognizing that some NNUs are likely to be filed by individuals or smaller noncommercial entities with limited expertise with copyright licensing, the Office's form will also provide cues for users to provide additional optional information that is commonly helpful in licensing transactions, such as spaces for title of the project, the playing time of the Pre-1972 Sound Recording to be used as well as total playing time, description of corresponding visuals in the case of audiovisual uses, and whether and how the user will credit the sound recording title, featured artist, and/or rights owner in connection with the project. 147 The user may also opt to include additional information about the Pre-1972 Sound Recording as permitted by the Office's form or instructions, such as the year of release and version. Similarly, to increase the likelihood of a user receiving timely notification of a rights owner's decision to opt out of a proposed noncommercial use, the proposed rule allows a user to include an email address to which a rights owner may contact the user to obtain more information, or to send a copy of the Pre-1972 Opt-Out Notice in addition to filing a Pre-1972 Opt-Out Notice with the Copyright Office.

In addition, the proposed rule states that an NNU may not include a proposed use for more than one Pre-1972 Sound Recording unless all of the sound recordings include the same featured artist and were released on the same pre-1972 album or unit of publication. 148 The Office recognizes that, for efficiency, users desiring to make noncommercial use of multiple Pre-1972 Sound Recordings from the same album would prefer to file a single NNU in all cases. 149 The Office also recognizes, however, that multiple rights owners may own the various Pre-1972 Sound Recordings in the NNU—and that consequently, multiple rights owners may desire to file Pre-1972 Opt-Out Notices in response to the same NNU. In such circumstances, it may be difficult for rights owners as well as prospective users to evaluate opt-outs to proposed noncommercial uses.

Finally, the proposed rule also requires the individual submitting the NNU to certify that she has appropriate authority to submit the NNU, that the user desiring to make noncommercial use of the Pre-1972 Sound Recording (or the user's agent) conducted a good faith, reasonable search within the last 90 days without finding commercial exploitation of the sound recording, and that all information submitted to the Office in the NNU is true, accurate, and complete to the best of the individual's knowledge, information, and belief, and is made in good faith. Such requirements mimic certification requirements in a wide variety of other filings administered by the Copyright Office. 150 The proposed rule does not require users to submit documentation of their searches, but the Office encourages users to keep records of their searches in case they come into dispute.

The section 1401(c) exception applies only to noncommercial uses of Pre-1972 Sound Recordings. 151 Although section 1401(c) does not define “noncommercial,” it does state that “merely recovering costs of production and distribution of a sound recording resulting from a use otherwise permitted under [section 1401(c)] does not itself necessarily constitute a commercial use,”  152 and “the fact that a person engaging in the use of a sound recording also engages in commercial activities does not itself necessarily render the use commercial.”  153 The Conference Report further states that “the concept of noncommercial use should be understood in the same way as under other provisions of title 17, such as section 107, and includes uses such as teaching, scholarship and research.”  154 Although other parts of title 17 refer to “commercial” or “non-commercial” uses, nowhere in the statute are they defined. 155

The NOI questioned whether the Office should adopt guidelines for filers “as to what constitutes a `noncommercial' use, and if so, what?”  156 FMC strongly urged the Office to provide such guidance to “prevent situations where less sophisticated users misunderstand the statute.”  157 Similarly, A2IM and RIAA suggest “it is vitally important for both users and rights owners that the Office issue guidelines to help users recognize appropriate uses of section 1401(c) and help rights owners assess the NNUs that get filed,” particularly for users less experienced with copyright. 158 Citing an array of case law and endorsing a public survey on this topic from Creative Commons, they propose specific text for the Office's consideration. 159

On the other hand, Wikimedia Foundation cautioned the Office to avoid creating “complex presumptions” for specific anticipated fact patterns, suggesting that terms like “noncommercial” are defined in fact-specific contexts that are still being explored by courts. 160 The Kernochan Center provided a run-down of key court opinions with “differing conclusions as to what constitutes commercial versus noncommercial use.”  161 It suggested that the A2IM and RIAA proposal was insufficiently clarifying, while also acknowledging that failure to interpret the term might perpetuate conflicting interpretations by courts and advocacy groups. 162

The Office agrees with the Kernochan Center that defining noncommercial in relation to section 1401 is “a complex proposition.”  163 In a sense, section 1401(c) requires the Office to mediate a channel for users and rights owners to engage with each other regarding potentially noncommercial uses through competing filings, and it is not the Office's intention to constrain resolution of gray areas or edge cases through private negotiation or, if necessary, the courts. If anything, the Office hopes this new mechanism may engender dialogues to further productive developments in this area.

But in examining the relevant statutory and case law, as well as the comments, it is apparent that there are some touchstones in evaluating whether a use is noncommercial that may be helpful to flag for filers and other interested parties. While individual determinations may be fact-specific, inclusion of this new exception suggests a congressional intent to provide a new avenue to facilitate certain noncommercial uses. 164 Moreover, many comments pointed out that individuals and smaller nonprofit entities may benefit from additional explanation regarding the content and filing of NNUs. 165 The Office plans to include information directed at helping users determine whether and how to file a NNU, including considerations that may affect their own determination that a use is noncommercial. Such material may be included on the Office's instructions, forms, or other public resources, which will also make clear that the Office does not provide legal advice regarding specific uses. Because this information is directly tailored to the Office's promulgation of regulations establishing the content for the filing of NNUs, and is aimed at aiding prospective filers—both users and rights owners—in evaluating whether a use may fall under this noncommercial use exemption, the Office agrees that this guidance should not necessarily be presumed to directly bear upon questions related to other parts of the statute. 166

While this notice is not including specific language, the Office provisionally anticipates calling attention to the following types of considerations.

1. Use v. User. The evaluation should consider the type of use of the copyrighted material and not simply the nature of the user. 167 While a filer will be asked to disclose whether the user is a tax-exempt organization or other corporate entity, this information is helpful but not dispositive, as some uses by nonprofit organizations may constitute “commercial” use. 168 Similarly, some uses by for-profit entities may constitute “noncommercial” use  169 and “the fact that a person engaging in the use of a sound recording also engages in commercial activities does not itself necessarily render the use commercial.”  170

2. Educational uses. Educational uses “such as teaching, scholarship and research” are often noncommercial uses that provide a public benefit. 171 But some educational uses may be considered commercial, for example, when fees are charged or copies sold, or when the user gains another kind of measurable benefit (such as valuable authorship credit through plagiarism of the work), and so the educational nature of the use should be viewed as one important part of the overall evaluation whether the use is noncommercial. 172

3. Covering the costs of production and distribution of the sound recording. “Merely recovering costs of production and distribution of a sound recording resulting from a use” that would otherwise be considered noncommercial “does not itself necessarily constitute a commercial use.”  173 Similarly, the fact that the user may save money on a licensing fee does not automatically make the use commercial. 174

4. Financial gain or other profit. Beyond covering the costs of production and distribution, if the user otherwise “stands to profit from exploitation of the copyrighted material without paying the customary price,” it is more likely to be considered a commercial use. 175 For example, some courts have stated that if the use can be expected to bring the user “conspicuous financial rewards,” it is more likely to be commercial. 176 Some examples may include uses of a copyrighted work in an advertisement, through the sale of a newspaper or magazine (even by a non-profit organization), or other uses that directly earn users money. 177

5. Private personal uses. If the use is a private home use for an individual's personal enjoyment, it will generally be considered noncommercial. 178 Posting on the open, accessible internet is not a private use, even if the user does not encourage others to access the Pre-1972 Sound Recording.

6. Other individual uses. Putting a Pre-1972 Sound Recording on YouTube or another platform that allows users to upload content may or may not be commercial; again, the user must consider the purpose of the use, including whether the user is monetizing that use for profit. 179

Finally, the Copyright Office also addresses a question raised regarding the scope of its regulatory authority. EFF and Public Knowledge contend the Office lacks authority to issue guidance regarding the meaning of “noncommercial use” as part of this rulemaking. 180 Perhaps more broadly, EFF suggests that the Copyright Office requires “a statutory grant” “to give opinions” regarding copyright issues or the meaning of specific terms in the copyright law. 181 In point of fact here, three relevant statutory charges reside at 17 U.S.C. 701(b), 702, and 1401(c)(3). 182 It is well-established, permissible, and often necessary for the Office to construe or otherwise interpret the meaning of statutory terms as part of dutifully exercising its regulatory functions. 183 Indeed, this is a basic precept of administrative law. 184 As Congress has so directed, the Office will continue to interpret statutory terms as necessary to administer a wide variety of filings mandated under title 17, including NNUs, and also through documents such as circulars, its Compendium of U.S. Copyright Office Practices, or other public aids. 185 While it is true that courts afford varying levels of deference to these differing types of documents (as with any agency), that fact does not bear upon the Office's authority to issue these documents in fulfillment of its statutory functions and duties.

Stakeholders disagree on the Office's level of review of NNUs. Copyright Alliance, A2IM, and RIAA contend that the Office should reject NNUs that do not provide sufficient information or are “patently deficient.”  186 In addition, Copyright Alliance and FMC ask for guidance on how the Office plans to police bad faith or deficient notices. 187 By contrast, EFF maintains that the Office cannot reject facially complete notices of use or opt-out notices, 188 and Public Knowledge contends that section 1401(c) “contemplates no such role for the Office” to reject notices on substantive grounds. 189

As with similar types of filings made with the Office, the proposed rule states that the Office does not review NNUs for legal sufficiency. 190 Rather, the Office's review is limited to whether the formal and legal procedural requirements established under the rule (including completing the required information and payment of the proper filing fee) have been met. The Office's indexing of an NNU thus does not mean the proposed use in the NNU is, in fact, noncommercial. Users are therefore cautioned to review and scrutinize NNUs to assure their legal sufficiency before submitting them to the Office.

Section 1401(c)(6)(A) contemplates civil penalties for the filing of fraudulent NNUs ( e.g., fraudulently describing the use proposed). 191 In connection with the Office's exercise of the regulatory authority directed under the MMA and its general authority and responsibility to administer title 17, 192 the proposed rule states that if the Register becomes aware of abuse or fraudulent NNUs from a certain filer, she shall have the discretion to reject all submissions from that filer under section 1401(c) for up to one year.

Section 1401(c) requires NNUs to be “indexed into the public records of the Copyright Office.”  193 Under the proposed rule, an NNU will be considered “indexed” once it is made publicly available through the Office's online database of NNUs. Similar to the Office's database of indexed Pre-1972 Schedules, the Office intends to provide an online and searchable database of indexed NNUs. Rights owners can search on the prospective user's name, the title of the sound recording, the featured artist(s), and the ISRC provided in NNUs. 194 In addition, each NNU will be assigned a unique identifier by the Copyright Office, which will also be searchable. As noted below, rights owners will be required to include the unique identifier assigned to an NNU if the rights owner desires to file a Pre-1972 Opt-Out Notice in response. Although indexed NNUs will be publicly available, the proposed rule states that users cannot rely on NNUs filed by third parties (other than the user's agent). Similarly, a user cannot rely on her own NNU once the proposed term of use ends ( i.e., she must conduct a new good faith, reasonable search for the Pre-1972 Sound Recording and file a new NNU).

The proposed rule also confirms that persons may request timely notification of when NNUs are indexed into the Office's public records by following the instructions provided by the Copyright Office on its website. 195 Individuals requesting such notification can subscribe to a weekly email through a service similar to the Office's NewsNet service, which will provide a link to the Office's online database of indexed NNUs. The Office's searchable database will default to listing the NNUs with the most recent index dates first, so individuals should easily be able to identify recently indexed filings. 196

As noted above, the rights owner of a Pre-1972 Sound Recording may file a Pre-1972 Opt-Out Notice with the Copyright Office “opting out” of ( i.e., objecting to) the proposed use in an NNU within 90 days of the NNU being indexed into the Office's public records. 197 The proposed rule states that where a Pre-1972 Sound Recording has multiple rights owners, only one rights owner needs to file Pre-1972 Opt-Out Notice for purposes of section 1401(c)(5). 198 In addition, the proposed rule requires the Pre-1972 Opt-Out Notice to include the rights owner's name and the unique identifier assigned to the NNU by the Copyright Office. The submitter of the Pre-1972 Opt-Out Notice may opt in her discretion to comment on whether the proposed use constitutes noncommercial use. In keeping with filings of similar type, the Pre-1972 Opt-Out Notice must also include a certification that the individual submitting the notice has appropriate authority to do so and that all information submitted to the Office is true, accurate, and complete to the best of the individual's knowledge, information, and belief, and is made in good faith. The Office intends to make Pre-1972 Opt-Out Notices publicly available through the Office's online searchable database of NNUs.

If a rights owner files a timely Pre-1972 Opt-Out Notice, the proposed rule states that the user specified in the NNU use must wait one year before filing another NNU for the same or similar use of the Pre-1972 Sound Recording.

As with NNUs and similar types of filings made with the Office, the proposed rule states that the Office does not review Pre-1972 Opt-Out Notices for legal sufficiency, interpret their content, or screen them for errors or discrepancies. Rather, the Office's review is limited to whether the procedural requirements established by the Office (including payment of the proper filing fee) have been met. Rights owners are therefore cautioned to review and scrutinize Pre-1972 Opt-Out Notices to assure their legal sufficiency before submitting them to the Office. As with the Office's handling of fraudulent NNUs, because section 1401(c)(6)(B)(ii) contemplates civil penalties for a pattern of filing of fraudulent Pre-1972 Opt-Out Notices, 199 the proposed rule states that if the Register becomes aware of abuse or fraudulent Pre-1972 Opt-Out Notices from a certain filer, she shall have the discretion to reject all submissions from that filer for up to one year.

The Copyright Act grants the Office authority to establish, adjust, and recover fees for services provided to the public. 200 The rule proposes fees to file an NNU or an Opt-Out Notice that are the same as the current fee to record a notice of intention to make and distribute phonorecords under section 115 (“NOI”). 201 The Office anticipates that the processing of these documents will be analogous to that of processing electronic NOIs, and has based the proposed fee accordingly. 202 Similar to the Office's free NewsNet service, there will be no fee for individuals to request and receive timely notifications of when NNUs are indexed into the Office's public records.

In the past, the Office's communications with rulemaking participants have not generally included discussions about the substance of the proceeding apart from the noticed phases of written comments. The Office has determined that further informal communications with participants might be beneficial in limited circumstances where the Office seeks specific information or follow-up regarding the public record, such as to discuss nuances of proposed regulatory language. The primary means to communicate views in the course of the rulemaking will continue to be through the submission of written comments. In other words, this communication will supplement, not substitute for, the preexisting record.

To ensure that such communications are governed by transparent and consistent procedures, the Office is issuing the following guidelines, which may be supplemented by information on the Copyright Office's website at https://www.copyright.gov/rulemaking/pre1972-soundrecordings-noncommercial/:

1. Any interested participant seeking an ex parte in-person or telephone meeting with the Office in this proceeding should submit a written request to the persons identified in the contact information section of this NPRM. The request should identify the names of all proposed attendees, and the party or parties on whose behalf each attendee is appearing.

2. Ex parte meetings with the Office are intended to provide an opportunity for participants to clarify evidence and/or arguments made in prior written submissions, and to respond to questions from the Office on those matters. The Office will generally not consider or accept new documentary materials outside the rulemaking record.

3. Within two business days after the meeting, the attendees must email the Office (using the above email addresses) a letter detailing the information identified in paragraph 1 and summarizing the discussion at the meeting. The letter must summarize the substance of the views expressed and arguments made in such a way that a non-participating party will understand the scope of issues discussed; merely listing the subjects discussed or providing a 1-2 sentence description will not be sufficient. These letters will be made publicly available on the Copyright Office's website.

4. To ensure compliance with the statutory deadline, all ex parte meetings in this proceeding must take place no later than Friday, March 22, 2019. The Office will not consider requests to hold meetings after that date.

In consideration of the foregoing, the U.S. Copyright Office proposes amending 37 CFR part 201 as follows:

The additions and revisions read as follows:

As part of its ongoing revision of the VASRD, VA proposes changes to 38 CFR 4.88a, which pertains to chronic fatigue syndrome (CFS), and 38 CFR 4.88b, which pertains to the schedule of ratings for infectious diseases and immune disorders (we note that the proposed changes for § 4.88b exclude the schedule of ratings for nutritional deficiencies—diagnostic codes (DC) 6313, 6314, and 6315). VA last updated the schedule of ratings in § 4.88b on July 31, 1996 ( see 61 FR 39875) and updated § 4.88a on July 19, 1995 ( see 60 FR 37012).

VA proposes to: (1) Update the medical terminology and definition of certain infectious diseases and immune disorders; (2) add medical conditions not currently in the Rating Schedule; (3) refine evaluation criteria based on medical advances that have occurred since the last revision; and (4) incorporate current understanding of functional changes associated with or resulting from disease (pathophysiology).

A panel of independent experts convened by the Institute of Medicine (IOM) in February 2015 proposed an updated set of diagnostic criteria for infectious disease and immune disorders. This updated revision also included changing the name of CFS to “Systemic Exertion Intolerance Disease (SEID)/Chronic fatigue Syndrome (CFS).”

VA has clear authority to make this regulatory change because of its broad authority to “prescribe all rules and regulations which are necessary or appropriate to carry out the laws administered by [VA] and are consistent with those laws.” 38 U.S.C. 501(a); see also 38 U.S.C. 1155 (VA's authority to adopt and apply schedule for rating disabilities).

Currently, § 4.88a specifies older diagnostic criteria for the diagnosis of CFS and uses outdated terminology to refer to this complex disease. VA proposes to update the nomenclature for this disease, which is also known as systemic exertion intolerance disease (SEID) or myalgic encephalomyelitis (ME), by changing the diagnostic code name to “Systemic Exertion Intolerance Disease (SEID)/Chronic Fatigue Syndrome (CFS).” This new name captures a central characteristic of the disease that reflects negative effects of any exertion (physical, cognitive, or emotional) on patients' many organ systems. IOM (Institute of Medicine), Beyond Myalgic Encephalomyelitis/Chronic Fatigue Syndrome: Redefining an Illness (2015), http://www.nationalacademies.org/hmd/~/media/Files/Report%20Files/2015/ MECFS/MECFScliniciansguide.pdf (last accessed August 30, 2018).

VA is also proposing to revise the current diagnostic criteria for SEID/CFS to adhere to evidence-based criteria which were adopted by the Centers for Disease Control and Prevention (CDC). IOM Report on ME/CFS (2015) (updated July 3, 2017), https://www.cdc.gov/me-cfs/symptoms-diagnosis/diagnosis.html (last accessed July 17, 2018). According to the 2015 IOM Report, up to 2.5 million Americans suffer from this disease which is characterized by profound fatigue, cognitive dysfunction, sleep abnormalities, pain, autoimmune manifestations, and a variety of other symptoms that are made worse by exertion of any sort. New diagnostic criteria will take into consideration whether this severe chronic fatigue significantly interferes with daily activities and work, if the affected individual concurrently has four or more of the eight symptoms as outlined in CDC evidence-based criteria and whether these symptoms first appeared before the fatigue, have persisted or recurred during six or more consecutive months of illness, and were due to ongoing exertion or other medical conditions associated with fatigue.

The CDC mandates a thorough medical history, physical examination, mental status examination, and laboratory tests to identify underlying or contributing conditions that require treatment. CDC recognizes and identifies several conditions that do not exclude a diagnosis of SEID/CFS. Currently, § 4.88b lists 19 DCs encompassing infectious diseases and immune disorders. VA proposes to revise these codes to reflect current terminology, advances in medical knowledge, recommendations from the 2015 IOM Report on ME/CFS and a 2007 IOM Report on evaluating veterans for disability benefits, IOM, A 21st Century System For Evaluating Veterans for Disability Benefits (2007), https://www.nap.edu/read/11885/chapter/1 (last accessed July 17, 2018).

Currently, each infectious disease listed under § 4.88b has its own prescribed rating criteria. In most cases, each specific infectious disease warrants a 100 percent evaluation during an active period of the disease. Thereafter, any residual functional impairment from the infectious disease determines the level of disability. These evaluation principles are generally consistent with the clinical presentation of infectious diseases.

VA proposes one General Rating Formula for § 4.88b. This approach is based on the association between clinical resolution or stabilization of an infectious disease and elimination or complete suppression of the causative infectious agent. Regardless of whether resolution occurs spontaneously or because of treatment, long-term disability in such situations results from residual functional impairment of the body systems affected by the infectious disease, rather than the infection itself. Sheila Davey, World Health Organization, World Health Organization Report on Infectious Diseases: Removing Obstacles to Healthy Development (1999).

Therefore, VA's proposal to use a General Rating Formula does not substantively change the current evaluation criteria so much as their organization. This rulemaking proposes to restructure rating criteria by creating one General Rating Formula applicable to multiple infectious diseases, regardless of etiology. A General Rating Formula for infectious diseases would ensure consistency in rating these conditions and be similar to the use of a General Rating Formula in other sections of the VASRD, such as in §§ 4.97, 4.116, 4.130, and others. This formula would be a familiar concept for Veterans Benefits Administration (VBA) employees and minimize the risk for error by providing one criterion applicable to multiple diagnostic codes. Although each specific infectious disease has a different etiology and natural history, once the active disease phase is over, disability would be rated on residuals. VA would assign a 100 percent disability rating during the variable length of each specific disease's active phase. For most infectious diseases manifesting acutely, the length of the active disease phase ( i.e., the time between disease onset and resolution or stabilization) is at most usually six to eight weeks. VA proposes to assign a 100 percent evaluation during the active disease phase. VA recognizes that some infectious diseases, such as tuberculosis, may have a longer than average active disease phase. Therefore, VA proposes that the General Rating Formula apply only in those cases where specific rating criteria are not otherwise provided. Diagnostic codes in § 4.88b that would not follow the General Rating Formula would be 6301, 6302, 6310, 6311, 6312, 6313, 6314, 6315, 6325, 6326, 6351, and 6354.

After the disease becomes inactive, VA proposes to assign a 0 percent evaluation. However, even though advancements in antimicrobial therapy have significantly lessened the occurrence of residuals of infectious diseases, they continue to occur. Therefore, VA generally proposes to append each diagnostic code with a note describing the most common residuals associated with a given infection. See below for additional details. As a list of every residual would be impractical, these notes would clearly indicate that they are not exhaustive. Where ascertainable residuals exist, VA proposes to assign evaluations for those residuals under the appropriate body system(s).

Certain infectious conditions are prone to relapse and require laboratory evaluation for confirmation. L. Joseph Wheat et al., Clinical Practice Guidelines for the Management of Patients with Histoplasmosis: 2007 Update by the Infectious Diseases Society of America, 45 Clinical Infectious Diseases 807, 807-25 (2007). Oftentimes, non-specific constitutional symptoms (weakness, tiredness, insomnia, weight loss, etc.) occur following the active phase of an infectious disease. However, such symptoms may be due to other causes than the infection. Therefore, to ensure VA assigns the most appropriate evaluations for relapsing infections, VA proposes to include a note in the rule requiring that relapses be confirmed by pathogen-specific testing using appropriate microbiologic, serologic, biochemical ( e.g., nucleic acid detection)histopathologic methods.

Finally, although VA proposes using a General Rating Formula for most infectious diseases, VA notes that each infectious disease has a different long-term impact. For those that have longer active phases and/or are commonly associated with relapse and residuals, VA proposes to require VA examination once the disease is no longer active so that a medical professional can evaluate the individual's condition. In these cases, VA also proposes to apply the provisions of § 3.105(e) that require VA to send beneficiaries notice of any proposed reduction in evaluation and provide an opportunity to respond before it becomes effective.

As discussed above, VA proposes to apply a General Rating Formula for infectious diseases unless otherwise noted. Additionally, VA proposes to provide notes identifying common residuals associated with particular diseases and instructions to rating personnel regarding the level of medical review necessary following cessation of treatment and infection. These specific proposed changes are discussed below.

Currently, DC 6300 is titled “Cholera, Asiatic” referring only to infection with toxigenic strains of Vibrio cholerae; it does not reflect infections due to other species within the genus Vibrio. Non-cholera Vibrio species cause diarrheal diseases, as well as wound infections and septicemia. To reflect the total array of diseases caused by Vibrio species, VA proposes to rename this DC “Vibriosis (cholera, non-cholera), to encompass conditions caused by V. cholerae and by non-cholera Vibrio organisms.

Cholera due to V. cholerae and gastroenteritis due to other Vibrio species are associated with severe diarrhea of relatively short duration. Hoi Ho et al., Vibrio Infections, Medscape.com (July 24, 2018), http://emedicine.medscape.com/article/232038-overview. Including the incubation period, cholera usually lasts 7 to 10 days and results in total remission, or, in 5 to 10 percent of cases, death if left untreated. Therefore, the proposed General Rating Formula would be appropriate for both cholera and non-cholera gastroenteritis due to other Vibrio species, and VA would remove the existing provision for a separate three-month convalescence period as it would no longer be necessary.

VA proposes to use a note to provide information about common residual disability of cholera and non-cholera Vibrio infection, including renal failure, skin, and musculoskeletal conditions, such as necrotizing fasciitis. VA proposes no changes to the evaluation criterion for this DC except eliminating the three-month convalescence and adding a note to address rating of residual disability.

VA evaluates DC 6301, visceral leishmaniasis, at 100 percent for six months following cessation of treatment, after which a VA examination helps determine residual disability. VA proposes only minor changes to this rating criteria, but proposes to change the note regarding rating residual disability. VA would generally identify those residuals commonly associated with post-infection or post-treatment residuals that may warrant evaluation. Currently, DC 6301 lists lymphadenopathy as one such residual disability. However, lymphadenopathy follows numerous diseases and is a frequent physical finding which, even when permanent, is otherwise without symptoms or disability that would warrant evaluation. Robert Ferrer, Lymphadenopathy: Differential Diagnosis and Evaluation, 58 a.m. Fam. Physician 1313, 1313-20 (Oct. 15, 1998). In many cases, it may constitute a normal physical finding. Vikramjit S. Kanwar, Lymphadenopathy, Medscape.com (Feb. 1, 2018), http://emedicine.medscape.com/article/956340-overview.

As lymphadenopathy is often associated with other diseases and, regardless of origin, commonly presents without symptoms or disability warranting evaluation, VA proposes to remove it from the note in DC 6301. VA notes that the list of possible residuals in proposed DC 6301 would not be exhaustive. Thus, if a veteran presents with lymphadenopathy as a residual of visceral leishmaniasis that results in chronic, functional impairment, VA would consider an evaluation under the appropriate system.

In addition to the above revision, VA proposes to amend the existing Note 1 to inform that the residual effects of infection include bone marrow diseases. Parasites—Leishmaniasis, CDC (Jan. 10, 2013), https://www.cdc.gov/parasites/leishmaniasis/index.html. This note would also refer to the residuals listed in 38 CFR 3.317(d), “Long-term health effects potentially associated with infectious diseases.”

Finally, VA proposes to add a new Note 2 to address the use of culture, histopathology, and other diagnostic testing to confirm relapses. Clinicians rely on such diagnostic testing, which has increased steadily in accuracy and availability, to determine whether symptoms are due to leishmaniasis or some other disease. Shyam Sundar & M. Rai, “Laboratory Diagnosis of Visceral Leishmaniasis,” 9 Clinical and Diagnostic Laboratory Immunology 951, 951-58 (2002). VA also proposes to retitle the existing note as Note 1 to account for the addition of this second note.

VA would not change the rating criteria for leprosy (Hansen's disease), but proposes to amend the current Note under DC 6302 by adding amputations as a residual in the proposed Note. The neurologic impairment in leprosy involves sensory and motor deficits/loss in the extremities that may lead to auto-amputation. Preenon Bagchi et al., Bacterio-Informatics: Identifying the Cause of Hansen's Disease and Establish [sic] a Remedy for the Same, 2 Int'l J. of Bioinformatics Res. and Applications 15, 15-19 (2010).

VA proposes to evaluate DC 6304, malaria, using the General Rating Formula because it is an acute, debilitating disease with predictable clinical presentation.

VA proposes to amend an existing note and to add one new notes. Note 1 would explicitly state that VA requires diagnostic confirmation for both the initial diagnosis and any relapse. To reflect advances in malarial testing, VA also proposes to refer to other specific diagnostic tests such as antigen detection, immunologic (immunochromatographic) tests, and molecular testing, such as polymerase chain reaction tests. Malaria Diagnosis (United States), CDC (Nov. 19, 2015), https://www.cdc.gov/malaria/diagnosis_treatment/diagnosis.html.

Note 2 would recognize potential nervous system residuals because severe forms of malaria affect the brain as an encephalopathy. Pralay Sarkar et al., “Critical care aspects of malaria,” 25 J. of Intensive Care Med. 93, 93-103 (2010). In addition, this note would also refer to the residuals listed in § 3.317(d).

VA proposes to amend the title of this DC, currently “Lymphatic filariasis,” to include the term elephantiasis, which is another name commonly associated with the chronic form of this condition. Lymphatic Filariasis Fact Sheet No. 102, World Health Organization (May 11, 2018), http://www.who.int/mediacentre/factsheets/fs102/en/.

The new General Rating Formula would provide 100 percent evaluation for the acute phase of active infection for lymphatic filariasis. The proposed General Rating Formula would be appropriate for use in this acute infection. However, no actual changes in the evaluation criteria would result from this organizational change intended to help rating personnel easily apply the VASRD.

VA proposes to add information to more adequately address the range of potential residuals, which include lymphedema (permanent swelling) and lymphatic obstruction. Parasites—Lymphatic Filariasis, CDC (June 14, 2013), http://www.cdc.gov/parasites/lymphaticfilariasis/disease.html. VA proposes a new Note to instruct rating personnel to evaluate under the appropriate body system residuals such as epididymitis, lymphangitis, lymphatic obstruction, or lymphedema affecting extremities, genitals, and/or breasts.

Bartonellosis, currently evaluated under DC 6306, generally resolves within two months with appropriate treatment. Kassem A. Hammoud et al., Bartonellosis, Medscape.com (Oct. 17, 2012), http://emedicine.medscape.com/article/213169-overview. Therefore, VA proposes to rate active bartonellosis under the General Rating Formula at 100 percent, and VA would remove the existing provision for a separate three-month convalescence period as it would no longer be necessary.

VA also proposes to update the residual disability to include endocarditis, which occurs when the bloodstream may carry this bacterium to the heart valves. John L. Brusch et al., Infective Endocarditis—Pathophysiology, Medscape.com (Dec. 17, 2013), http://emedicine.medscape.com/article/216650-overview#a0104.

VA proposes to evaluate DC 6307, plague, which is an acute, debilitating disease of short duration, using the General Rating Formula.

Use of modern antibiotics renders residual disability from the infection itself extremely rare. Therefore, VA proposes to delete the existing note regarding specific residuals and replace it with a note stating that VA would rate any residual disability under the appropriate body system. Again, lymphadenopathy is a frequent physical finding following numerous diseases, often permanent and without disabling symptoms. Robert Ferrer, Lymphadenopathy: Differential Diagnosis and Evaluation, 58 Am.Fam. Physician at 1313-20. VA proposes removing lymphadenopathy as a residual because it may be a normal physical finding. Vikramjit S. Kanwar, Lymphasdenopathy, Medscape.com (July 10, 2015), http://emedicine.medscape.com/article/956340-overview ); Plague, CDC (Nov. 28, 2012), http://www.cdc.gov/plague/.

VA proposes to evaluate DC 6308, relapsing fever, which is an acute, debilitating disease of short duration, using the General Rating Formula.

Modern treatment helps most patients recover from this disease within a few days, with little incidence of splenic damage. Long-term sequelae of relapsing fever are rare, but include iritis, uveitis, cranial nerve, and other neuropathies. Tick-borne Relapsing Fever (TBRF), CDC (Jan. 8, 2016), http://www.cdc.gov/relapsing-fever/clinicians/. Therefore, VA proposes a new Note adding iritis and uveitis as residual disabilities and retaining the remainder of the existing information without substantive change.

VA does not propose any changes to the evaluation criteria for this DC.

VA proposes to evaluate DC 6309, rheumatic fever, which is an acute, febrile disease typically lasting less than a month, using the General Rating Formula. The existing note regarding residuals would remain substantively unchanged.

VA does not propose substantive change to the criteria under diagnostic code 6310 for syphilis and other treponemal infections. However, for consistency with the remainder of this section, VA proposes to replace the term “complications” with the term “residual disability,” which VA would rate under the appropriate body system.

Additionally, VA proposes to remove specific references to the names associated with each DC identified in this note because future revisions of the rating schedule would retitle several of them.

Currently, DC 6311, miliary tuberculosis, provides a 100 percent evaluation during active infection. Under § 4.88c, the 100 percent is continued for one year following the date of inactivity. Active infection may last for months to years, and, if undiagnosed or untreated, may result in death. The standard treatment for drug-susceptible miliary tuberculosis is six to nine months with a combination of anti-tuberculosis drugs. If the meninges are involved, treatment will last for 9 to12 months, but may occasionally require longer a treatment duration. Nahid, P., et al., “Executive Summary: Official American Thoracic Society/Centers for Disease Control and Prevention/Infectious Diseases Society of America Clinical Practice Guidelines: Treatment of Drug-Susceptible Tuberculosis,” 63 Clinical Infectious Diseases 853, 853-867 (Oct. 2016), https://www.nidcd.nih.gov/health/balance/pages/meniere.aspx (last visited January 22, 2019). Relapses are common when medication is not taken for the full time prescribed and/or not taken in the appropriate combination. Generally, most relapses occur within the first 12 months of treatment completion. Tuberculosis (TB) Guidelines. CDC (May 4, 2016), https://www.cdc.gov/tb/publications/guidelines/treatment.htm.

To ensure that individuals are entitled to any resumption or continuation of the 100 percent evaluation after the initial active disease, VA proposes to add a Note requiring confirmation of relapse by culture, histopathology, or other diagnostic laboratory testing.

VA also proposes Note 2 addressing residuals which may be found under § 4.88c. Infection residuals include, but are not limited to, chronic diagnosed disabilities affecting such body systems as the skin and respiratory, central nervous, musculoskeletal, ocular, gastrointestinal, and genitourinary systems. VA would rate them under the appropriate body system. J.J. van der Harst & G.J. Luijckx, Treatment of Central Nervous System Tuberculosis Infections and Neurological Complications of Tuberculosis Treatment, 17 Current Pharmaceutical Design 2940, 2940-47 (2011).

VA proposes to evaluate DC 6316, brucellosis, an acute, debilitating disease of short duration usually lasting several weeks or less, using the General Rating Formula. Brucellosis is easily treated with antibiotics, but, if untreated, brucellosis may become chronic and leave significant residuals. VA proposes no changes to the evaluation criteria.

As the correct diagnosis is essential in determining if symptoms are due to brucellosis or some other disease entity, VA proposes to add a new Note 1 directing that culture, serologic testing, or both must confirm both the initial diagnosis and any relapse of active infection. Wafa Al-Nassir, Brucellosis, Medscape.com (June 16, 2017), http://emedicine.medscape.com/article/213430-overview.

VA proposes to amend the existing note as Note 2 and expand the list of residuals in light of advances in medicine and early treatment. Note 2 would reflect the residuals most commonly associated with this infection, including meningitis, and liver, spleen, or musculoskeletal conditions. Brucellosis, CDC (Sept. 13, 2017) http://www.cdc.gov/brucellosis/index.html . As this condition is a presumptive disease related to Gulf War service, this note would also refer to the many specific residuals of brucellosis listed in § 3.317(d).

Currently, DC 6317 represents scrub typhus, an acute debilitating rickettsial disease lasting for several weeks or less. If untreated, a high mortality rate results. Antibiotic treatment rapidly eradicates the disease and significantly reduces the chances of complications. Therefore, VA proposes to evaluate DC 6317 using the General Rating Formula. VA proposes to rename this DC to encompass all forms of rickettsial and similar erlichial and Anaplasma infections. These infections are not specific to the veteran population as they afflict travelers and field scientists as well. Renaming this DC would mean rating personnel need not further clarify the type of typhus infecting a veteran.

VA is not proposing any changes to the evaluation criteria except to use the General Rating Formula. VA would also remove the existing provision for a separate three-month convalescence period as it would no longer be necessary.

VA proposes to update the existing note to include such residuals frequently associated with DC 6317 as involvement of bone marrow and the central nervous system, in addition to the current list of spleen damage or skin conditions.

Rickettsial, ehrlichial, and Anaplasma infections cause similar nonspecific influenza-like illness in humans, including but not limited to, scrub typhus, Rocky Mountain spotted fever, African tick-borne fever, ehrlichiosis, and anaplasmosis. Therefore, VA also proposes to add a second note to list other rickettsial infections, including infections by Ehrlichia and Anaplasma species (members of the order Rickettsiales) to account for its occurrence in the U.S. veteran population. Johan S. Bakken & J. Stephen Dumler, Ehrlichiosis and Anaplasmosis, Medscape.com (2004), https://www.medscape.com/viewarticle/490468_4.

Currently, DC 6318 represents melioidosis, an acute debilitating bacterial disease lasting several weeks or less, which, if left untreated, may result in mortality. VA proposes no changes to the evaluation criteria, except use of the General Rating Formula.

As accuracy is essential in diagnosing melioidosis, VA proposes to add Note 1 directing that culture or other specific diagnostic laboratory tests must confirm both the initial diagnosis and any relapse or chronic activity of infection.

VA would retain the existing information regarding common residuals and the instruction to rate residuals under the appropriate body system under Note 2.

VA currently assigns a 100 percent evaluation for DC 6319, Lyme disease, when it is active. Lyme disease is an acute illness, usually lasting several weeks or less. Therefore, VA proposes to rate Lyme disease under the General Rating Formula, without changes to the actual evaluation criteria. VA also proposes to amend the existing note associated with this DC to account for residuals such as Bell's palsy, radiculopathy, ocular, and cognitive dysfunction, in addition to arthritis.

Currently, DC 6320 represents “Parasitic diseases otherwise not specified.” VA proposes no changes to the evaluation criteria except to use the General Rating Formula. VA also proposes to amend the existing note associated with this DC with general instructions to rate any residuals of this infection under the appropriate body system.

VA proposes a number of changes to DC 6351, which pertains to human immunodeficiency virus (HIV) related illness. Currently, VA provides a 100 percent evaluation for “AIDS with recurrent opportunistic infections or with secondary diseases affecting multiple body systems; HIV-related illness with debility and progressive weight loss, without remission, or few or brief remissions.” VA proposes to remove the statement about remission because the CDC considers AIDS a chronic condition, and the diagnosis continues once a person is properly diagnosed, regardless of improvements in that person's condition.

When VA last revised the evaluation criteria, the medical community considered oral hairy leukoplakia (OHL) a distinctive clinical marker of HIV infection. Since then, measurement of the peripheral CD4 cell count and HIV viral load have become the standard method for evaluating a patient's stage of HIV infection. Sowmya Nanjappa, Anti-retroviral Therapy in Treatment-Naïve Patients, Medscape.com (June 3, 2016), https://emedicine.medscape.com/article/2041458-overview. In addition, OHL by itself rarely, if ever, requires specific treatment in patients receiving anti-retroviral therapy. James Cade, Hairy Leukoplakia Treatment and Management, Medscape.com (December 19, 2018), https://emedicine.medscape.com/article/279269-overview. VA proposes to remove reference to OHL in the criteria for a 30 percent evaluation.

Similarly, VA proposes to modify the reference of oral candidiasis to esophageal and lower respiratory tract candidiasis for the criteria for a 30 percent evaluation. In the past, oral candidiasis was strongly associated with HIV infection. However, the increased use of antiretroviral medications has greatly reduced the incidence of this condition in HIV-positive individuals. C. Frezzini et al., Current Trends of HIV Disease of the Mouth, 34 J. of Oral Pathology & Med. 513, 513-31 (2005).

For clarification, VA proposes to replace the phrase “definite medical symptoms” in the criteria for a 10 percent evaluation with “HIV-related constitutional symptoms.” VA would not change the remainder of the criteria for a 10 percent evaluation. The criteria for a 0 percent evaluation would not change.

Existing Note 1 would continue to provide that “medications prescribed as part of a research protocol at an accredited medical institution” are to be considered “approved medication” within the context of the evaluation criteria. VA proposes to add a reference to treatment regimens as part of a research protocol at an accredited medical institution because some research protocols use not only new medications but also new regimens for already FDA approved medications.

Existing Note 2 would continue to provide for separate evaluation of various manifestations of HIV infection under the appropriate diagnostic codes. VA proposes to retain the instruction to evaluate on the basis of psychiatric or central nervous system manifestations, opportunistic infections, and neoplasms, rather than based on this diagnostic code, if a higher overall evaluation results. However, VA proposes to substitute the term “diagnosed psychiatric condition” for the phrase “psychiatric manifestations.” VA recognizes that a veteran may exhibit psychiatric symptoms, such as depression, which do not rise to the level of a diagnosed disability. Such symptoms are more appropriately rated under DC 6351 as 10 percent disabling, provided there is evidence of activity limitations. Note 2, however, would refer to diagnosed, disabling acquired psychiatric illness.

VA also proposes the addition of a new Note 3 to assist rating personnel in applying these revised evaluation criteria. Note 3 would include a list of current opportunistic infections, which includes the following conditions: Candidiasis of the bronchi, trachea, esophagus, or lungs; invasive cervical cancer; coccidioidomycosis; cryptococcosis; cryptosporidiosis; cytomegalovirus (particularly CMV retinitis); HIV-related encephalopathy; herpes simplex-chronic ulcers of greater than one month's duration, or bronchitis, pneumonia, or esophagitis; histoplasmosis; isosporiasis (chronic intestinal); Kaposi's sarcoma; lymphoma; Mycobacterium avium complex; tuberculosis; Pneumocystis jirovecii ( carinii ) pneumonia; pneumonia, recurrent; progressive multifocal leukoencephalopathy; Salmonella septicemia, recurrent; toxoplasmosis of the brain; and wasting syndrome due to HIV. AIDS and Opportunistic Infections, CDC (July 23, 2018), https://www.cdc.gov/hiv/basics/livingwithhiv/opportunisticinfections.html.

VA is proposing no change to the rating criteria for this DC other than to update the name from chronic fatigue syndrome (CFS) to systemic exertion intolerance disease/chronic fatigue syndrome (CFS). VA would, however, clarify the note to indicate that incapacitation requires that a licensed physician must prescribe both bed rest and treatment, which would be consistent with current VA practice.

As discussed above, in addition to updating existing DCs, VA proposes to add medical conditions not currently listed in the Rating Schedule:

VA proposes to add a new DC 6312 for “Nontuberculosis mycobacterial infection” (NTM). NTM lung infection occurs when a person inhales the organism from the environment. Most people do not become ill but some susceptible individuals require prolonged treatment of one to two years. Without treatment, many people, but not all, will develop a progressive lung infection characterized by cough, fatigue, and often weight loss. However, death directly related to NTM lung disease is relatively rare in immunocompetent individuals.

Systemic infection, which is the most severe form, is most often seen in individuals with other underlying conditions, especially those that inhibit immune function. Arry Dieudonne, Atypical Mycobacterium Infection, Medscape.com (Feb. 7, 2018), http://emedicine.medscape.com/article/972708-overview.

Similar to other infectious diseases found in the Rating Schedule, VA proposes to assign a 100 percent evaluation during active infection, after which a mandatory VA evaluation would be conducted to determine the appropriate evaluation based on residuals, if any. Therefore, VA proposes a Note 1 to this effect and instructs that any change in evaluation based upon that or any subsequent examination shall be subject to the provisions of § 3.105(e). Furthermore, the note would instruct rating personnel to rate on residuals if there is no relapse.

Establishing the correct diagnosis is essential in determining if symptoms are due to NTM or some other disease entity. Diagnostic testing has become more accurate and readily available over the years. Therefore, VA proposes a Note 2, requiring diagnostic confirmation for subsequent relapses.

VA proposes to include Note 3, which would identify common residuals to assist rating personnel in assigning evaluations following cessation of the 100 percent evaluation. Residuals of infection identified in Note 3 would include skin conditions and conditions of the respiratory, central nervous, musculoskeletal, ocular, gastrointestinal, and genitourinary systems.

VA proposes to add new DC 6325 which applies to hyperinfection syndrome or disseminated strongyloidiasis. Because strongyloidiasis is not an acute, self-limited disease, VA would not use the General Rating Formula. Similar to other severe infectious diseases, VA proposes to assign a 100 percent evaluation during active disease followed by a mandatory VA evaluation to determine the appropriate evaluation based on any residuals. Systemic infection, which is the most severe form of strongyloidiasis, with a mortality rate approaching 90 percent, is most often seen in individuals with other underlying conditions, especially those with compromised immune function. Parasites—Strongyloides, Resources for Health Professionals, CDC (Jan. 6, 2012), http://www.cdc.gov/parasites/strongyloides/. VA is not proposing to list the most common residuals because their number is so vast.

VA proposes a new diagnostic code for schistosomiasis, the second most common parasitic disease in the world. Parasites—Schistosomiasis, CDC (Apr. 30, 2018), http://www.cdc.gov/parasites/schistosomiasis/. While the parasite is not found in the United States, it is sufficiently prevalent in tropical regions that VA may presume service connection if records indicate service in such regions. See 38 CFR 3.309(b). VA is proposing to add a distinct DC for schistosomiasis because it otherwise lacks a means to accurately track such claims and can evaluate them only by analogy.

Most people who contract schistosomiasis are asymptomatic and have subclinical disease during both acute and chronic stages of infection. Persons with acute infection (also known as Katayama syndrome) may present with mild symptoms such as rash, fever, headache, myalgia, and respiratory symptoms that are not disabling.

Chronic disease results from host immune responses to schistosome eggs: S. mansoni and S. japonicum. These eggs most commonly lodge in the blood vessels of the liver or intestine with chronic inflammation leading to bowel wall ulceration, hyperplasia, and polyposis and, with heavy infections, to liver fibrosis and portal hypertension.

S. haematobium eggs tend to lodge in the urinary tract and the female genital tract. Female genital schistosomiasis can affect the cervix, fallopian tubes, and vagina.

Central nervous system lesions, such as in the spinal cord or brain and inflammatory reactions, may cause the formation of granulomas that act as space-occupying lesions.

VA proposes to evaluate DC 6326 by assigning a 0 percent evaluation for acute and asymptomatic chronic infections. Additionally, VA proposes to note common residuals of infection, such as liver and genitourinary tract conditions. VA would rate residual disability in the appropriate system.

VA proposes new DC 6329 to encompass hemorrhagic fevers, including dengue, yellow fever, and others. While these fevers are uncommon in the United States, they are prevalent in tropical regions and, therefore, associated with military deployments. David C. Pigott, CBRNE—Viral Hemorrhagic Fevers, Medscape.com (Mar. 16, 2017), https://emedicine.medscape.com/article/830594-overview. VA may presume service connection for hemorrhagic fever if records indicate service in certain regions. See 38 CFR 3.309(b). VA is proposing to add a distinct DC for hemorrhagic fever because it otherwise lacks a means to accurately track such claims and can evaluate them only by analogy.

VA proposes to apply the General Rating Formula and assign a 100 percent evaluation for active disease because hemorrhagic fever is associated with a debilitating, acute, febrile illness that often lasts for several weeks at most. VA also proposes to include a note listing common residual disabilities of central nervous system, liver, or kidney conditions.

VA proposes new DC 6330 for infections caused by Campylobacter jejuni. In 2010, VA issued a regulation establishing that Campylobacter jejuni is subject to presumptive service connection for certain veterans because it is (1) prevalent in Southwest Asia, (2) has been diagnosed among U.S. troops serving in the Persian Gulf/Southwest Asia Theater of operations, and (3) is known to cause long-term adverse health effects. See 75 FR 59968 and 38 CFR 3.317. To monitor claims for this infection, VA proposes a diagnostic code specifically for Campylobacter jejuni.

VA proposes to rate Campylobacter jejuni infection under the General Rating Formula, meaning that it would receive a 100 percent evaluation during active infection. The symptoms of Campylobacter jejuni infection consist of diarrhea, cramping, abdominal pain, and fever within two to five days after exposure to the bacteria. The diarrhea may be bloody and can be accompanied by nausea and vomiting. The illness typically lasts about one week. Campylobacter (Campylobacteriosis), CDC (Aug. 30, 2017), https://www.cdc.gov/campylobacter/index.html.

Thereafter, VA would rate the condition based on residuals listed in § 3.317(d), “Long-Term Health Effects Potentially Associated With Infectious Diseases,” such as Guillain-Barre syndrome, reactive arthritis, and uveitis.

VA proposes a new diagnostic code to encompass infections caused by Coxiella burnetii. In 2010, VA issued a regulation establishing that infection due to Coxiella burnetii (Q fever) is subject to presumptive service connection for certain veterans because it is (1) prevalent in Southwest Asia, (2) has been diagnosed among U.S. troops serving in the Persian Gulf/Southwest Asia theater of operations, and (3) is known to cause long-term adverse health effects. See 75 FR 59968 and 38 CFR 3.317. To track claims for this infection, VA proposes a diagnostic code specifically for Coxiella burnetii infection (Q fever).

VA proposes assigning a 100 percent evaluation during active infection according to the General Rating Formula. Thereafter, VA would rate the condition based on residuals listed in § 3.317(d), such as chronic hepatitis, endocarditis, osteomyelitis, post Q-fever chronic fatigue syndrome, and vascular infections.

VA proposes a new diagnostic code to encompass infections caused by nontyphoidal Salmonella. In 2010, VA issued a regulation establishing that nontyphoidal salmonellosis is subject to presumptive service connection for certain veterans. See 75 FR 59968 and 38 CFR 3.317. To track claims decisions regarding this infection and to more consistently rate it, VA proposes a diagnostic code specifically for nontyphoidal salmonellosis.

VA proposes to assign a 100 percent evaluation during active infection according to the General Rating Formula. Thereafter, VA would rate the condition based on residuals, including those listed in § 3.317(d), such as reactive arthritis.

VA proposes a new diagnostic code to encompass infections caused by Shigella, which would be rated under the General Rating Formula. In 2010, VA issued a regulation presuming service connection for Shigella infection in certain veterans. See 75 FR 59968 and 38 CFR 3.317. To allow for better tracking of decisions on claims for this infection and to more consistently rate it, VA proposes a diagnostic code specifically for Shigella infection.

VA would rate the condition based on residuals, including those listed in § 3.317(d), such as hemolytic-uremic syndrome, and reactive arthritis.

VA proposes a new diagnostic code to encompass infections caused by West Nile virus. In 2010, VA issued a regulation presuming service connection for West Nile virus in certain veterans. See 75 FR 59968. To better track claims decisions regarding this infection, VA proposes a separate diagnostic code for West Nile virus, which would be rated under the General Rating Formula.

VA would rate the condition based on residuals, including those listed in § 3.317(d), such as variable physical, functional, or cognitive disability.

Executive Orders 12866 and 13563 direct agencies to assess the costs and benefits of available regulatory alternatives and, when regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, and other advantages; distributive impacts; and equity). Executive Order 13563 (Improving Regulation and Regulatory Review) emphasizes the importance of quantifying both costs and benefits, reducing costs, harmonizing rules, and promoting flexibility. Executive Order 12866 (Regulatory Planning and Review) defines a “significant regulatory action,” which requires review by the Office of Management and Budget (OMB), as “any regulatory action that is likely to result in a rule that may: (1) Have an annual effect on the economy of $100 million or more or adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or tribal governments or communities; (2) Create a serious inconsistency or otherwise interfere with an action taken or planned by another agency; (3) Materially alter the budgetary impact of entitlements, grants, user fees, or loan programs or the rights and obligations of recipients thereof; or (4) Raise novel legal or policy issues arising out of legal mandates, the President's priorities, or the principles set forth in this Executive Order.”

The economic, interagency, budgetary, legal, and policy implications of this regulatory action have been examined, and it has been determined not to be a significant regulatory action under E.O. 12866. VA's impact analysis can be found as a supporting document at http://www.regulations.gov, usually within 48 hours after the rulemaking document is published. Additionally, a copy of this rulemaking and its impact analysis are available on VA's website at http://www.va.gov/orpm/, by following the link for “VA Regulations Published From FY 2004 Through Fiscal Year to Date.”

This rule is not an E.O. 13771 regulatory action because this rule is not significant under E.O. 12866.

The Secretary hereby certifies that this proposed rule would not have a significant economic impact on a substantial number of small entities as they are defined in the Regulatory Flexibility Act, 5 U.S.C. 601-612. This proposed rule would not affect any small entities. Only certain VA beneficiaries could be directly affected. Therefore, pursuant to 5 U.S.C. 605(b), this rulemaking is exempt from the initial and final regulatory flexibility analysis requirements of sections 603 and 604.

The Unfunded Mandates Reform Act of 1995 requires, at 2 U.S.C. 1532, that agencies prepare an assessment of anticipated costs and benefits before issuing any rule that may result in the expenditure by State, local, and tribal governments, in the aggregate, or by the private sector, of $100 million or more (adjusted annually for inflation) in any given year. This proposed rule would have no such effect on State, local, and tribal governments, or on the private sector.

This final rule contains no provisions constituting a collection of information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3521).

The Catalog of Federal Domestic Assistance program numbers and titles for this rule are 64.102, Compensation for Service-Connected Deaths for Veterans' Dependents; 64.105, Pension to Veterans, Surviving Spouses, and Children; 64.109, Veterans Compensation for Service-Connected Disability; and 64.110, Veterans Dependency and Indemnity Compensation for Service-Connected Death.

The Secretary of Veterans Affairs approved this document and authorized the undersigned to sign and submit the document to the Office of the Federal Register for publication electronically as an official document of the Department of Veterans Affairs. Robert L. Wilkie, Secretary, Department of Veterans Affairs, approved this document on January 29, 2019, for publication.

For the reasons stated in the preamble, the Department of Veterans Affairs proposes to amend 38 CFR part 4 as set forth below:

The revisions and additions read as follows:

The revisions and additions read as follows: